Valuation and Qualifying Accounts

12 Months Ended

Dec. 31, 2022

Valuation and qualifying accounts included the following:


(in thousands)	Balance Beginning of Year		Net Charged to Costs and Expenses		Translations, Reclassifications and Acquisitions			Net Write-Offs or Discounts Taken		Balance End of Year
2022

Reserve for sales discounts	$	12,567	$	137,553		$	(21)	$	(130,238)	$	19,861
Reserve for inventory obsolescence	12,908		6,998			(277)		(6,420)		13,209
Reserve for warranty	9,953		11,290			(244)		(11,659)		9,340
2021

Reserve for sales discounts	$	13,549	$	116,114		$	(688)	$	(116,408)	$	12,567
Reserve for inventory obsolescence	12,027		6,531			(146)		(5,504)		12,908
Reserve for warranty	9,096		10,727			(132)		(9,738)		9,953
2020

Reserve for sales discounts	$	16,883	$	93,398		$	15	$	(96,747)	$	13,549
Reserve for inventory obsolescence	8,233		4,609			1,471		(2,286)		12,027
Reserve for warranty	10,249		8,466			247		(9,866)		9,096

Sales Discounts

On December 31, 2022, the Company had $19.9 million in reserves for sales discounts compared to $12.6 million on December 31, 2021 on product shipped to our customers under various promotional programs. The most common programs provide a discount when the customer pays within a specified period of time.

The Company reviews the reserve quarterly based on analysis made on each program outstanding at the time. The cost of these discounts is estimated based on historical experience and known changes in promotional programs and is reported as a reduction to sales when the product sale is recognized. The reserve is adjusted if discounts paid differ from those estimated. Historically, those adjustments have not been material.

Reserve for Inventory Obsolescence

We value inventories at the lower of the cost of inventory or net realizable value. As needed, we record an inventory valuation adjustment for excess, slow moving, and obsolete inventory that is equal to the excess of the cost of the inventory over the estimated net realizable value. The inventory valuation adjustment to net realizable value establishes a new cost basis of the inventory that cannot be subsequently reversed. Such inventory valuation adjustments for excess, obsolete, and slow moving inventory are not reduced or removed until the product is sold or disposed of.

The Company had a reserve of $13.2 million on December 31, 2022 and $12.9 million on December 31, 2021 to cover obsolete and slow moving inventory. The increase in the reserve was primarily attributable to the Company's Industrial Equipment Division. The reserve for inventory obsolescence is calculated as follows: 1) no inventory usage over a three-year period is deemed obsolete and reserved at 100%; and 2) slow moving inventory with little usage requires a 100% reserve on items that have a quantity greater than a three-year supply. There are exceptions to the obsolete and slow moving classifications if approved by an officer of the Company, based on specific identification of an item or items that are deemed to be either included or excluded from this classification. In cases where there is no historical data, management makes a judgment based on a specific review of the inventory in question to determine what reserves, if any, are appropriate. New products or parts are generally excluded from the reserve until a three-year history has been established.

Warranty

The Company’s warranty policy is generally to provide its customers warranty for up to one year on all wholegood units and 90 days on parts, though some components can have warranty for longer terms.

Warranty reserve, as a percentage of sales, is generally calculated by looking at the current twelve months’ expenses and prorating that amount based on twelve months’ sales with a three to six month lag period. The Company’s historical experience is that an end-user takes approximately three to six months from the receipt of the unit to file a warranty claim.

The current liability warranty reserve balance was $9.3 million on December 31, 2022 and $10.0 million on December 31, 2021 and is included in Note 11.