I. Product Warranty

Teradyne generally provides a one-year warranty on its products, commencing upon installation, acceptance, delivery or shipment. A provision is recorded upon revenue recognition to cost of revenues for estimated warranty expense based on historical experience. Related costs are charged to the warranty accrual as incurred. The warranty balance below is included in other accrued liabilities on the balance sheet.


	For the Three Months Ended						For the Six Months Ended
	July 3, 2016			July 5, 2015			July 3, 2016			July 5, 2015
	(in thousands)
Balance at beginning of period	$	7,496		$	7,423		$	6,925		$	8,942
Acquisition		—			372			—			372
Accruals for warranties issued during the period		4,888			3,926			8,378			6,287
Adjustments related to pre-existing warranties		(420	)		(797	)		(177	)		(1,828	)
Settlements made during the period		(3,180	)		(2,696	)		(6,342	)		(5,545	)

Balance at end of period	$	8,784		$	8,228		$	8,784		$	8,228

When Teradyne receives revenue for extended warranties beyond one year, it is deferred and recognized on a straight-line basis over the contract period. Related costs are expensed as incurred. The extended warranty balance below is included in short and long-term deferred revenue and customer advances on the balance sheet.


	For the Three Months Ended						For the Six Months Ended
	July 3, 2016			July 5, 2015			July 3, 2016			July 5, 2015
				(in thousands)
Balance at beginning of period	$	46,115		$	40,704		$	46,499		$	43,300
Acquisition		—			699			—			699
Deferral of new extended warranty revenue		8,898			8,172			15,725			12,376
Recognition of extended warranty deferred revenue		(7,290	)		(6,276	)		(14,501	)		(13,076	)

Balance at end of period	$	47,723		$	43,299		$	47,723		$	43,299