GUARANTEES

The Company’s financial guarantees at March 31, 2018 are as follows:



(Millions of Dollars)	Term	Maximum Potential Payment		Carrying Amount of Liability
Guarantees on the residual values of leased assets	One to four years	$	101.6	$	—
Standby letters of credit	Up to three years	73.0		—
Commercial customer financing arrangements	Up to six years	71.6		25.9
Total		$	246.2	$	25.9

The Company has guaranteed a portion of the residual values of leased assets arising from its synthetic lease program. The lease guarantees are for an amount up to $101.6 million while the fair value of the underlying assets is estimated at $118.9 million. The related assets would be available to satisfy the guarantee obligations and therefore it is unlikely the Company will incur any future loss associated with these guarantees.

The Company has issued $73.0 million in standby letters of credit that guarantee future payments which may be required under certain insurance programs.

The Company provides various limited and full recourse guarantees to financial institutions that provide financing to U.S. and Canadian Mac Tool distributors and franchisees for their initial purchase of the inventory and trucks necessary to function as a distributor and franchisee. In addition, the Company provides limited and full recourse guarantees to financial institutions that extend credit to certain end retail customers of its U.S. Mac Tool distributors and franchisees. The gross amount guaranteed in these arrangements is $71.6 million and the $25.9 million carrying value of the guarantees issued is recorded in other liabilities in the Condensed Consolidated Balance Sheets.

The Company provides warranties on certain products across its businesses. The types of warranties offered generally range from one year to limited lifetime, and certain branded products recently acquired carry a lifetime warranty. Further, the Company sometimes incurs discretionary costs to service its products in connection with product performance issues. Historical warranty and service claim experience forms the basis for warranty obligations recognized. Adjustments are recorded to the warranty liability as new information becomes available.

The changes in the carrying amount of product and service warranties for the three months ended March 31, 2018 and April 1, 2017 are as follows:



(Millions of Dollars)	2018			2017
Balance beginning of period	$	176.0		$	103.4
Warranties and guarantees issued	24.2			22.7
Acquisition adjustments	15.8			—
Warranty payments and currency	(25.6		)	(24.6		)
Balance end of period	$	190.4		$	101.5