13.

GUARANTEES AND PRODUCT WARRANTIES

From time to time, our subsidiaries guarantee third party payment obligations in connection with the sale of machines to customers that use financing. We follow FASB guidance for accounting for guarantees (codified in ASC 460). As of October 31, 2015, we had 17 outstanding third party payment guarantees totaling approximately $1.2 million. The terms of these guarantees are consistent with the underlying customer financing terms. Upon shipment of a machine, the customer has the risk of ownership. The customer does not obtain title, however, until it has paid for the machine. A retention of title clause allows us to recover the machine if the customer defaults on the financing. We accrue liabilities under these guarantees at fair value, which amounts are insignificant.

We provide warranties on our products with respect to defects in material and workmanship. The terms of these warranties are generally one year for machines and shorter periods for service parts. We recognize a reserve with respect to this obligation at the time of product sale, with subsequent warranty claims recorded against the reserve. The amount of the warranty reserve is determined based on historical trend experience and any known warranty issues that could cause future warranty costs to differ from historical experience. A reconciliation of the changes in our warranty reserve is as follows (in thousands):

	2015		2014		2013
Balance, beginning of year	$	2,048	$	1,778	$	1,623
Provision for warranties during the year		3,736		3,846		3,811
Charges to the accrual		(3,495)		(3,529)		(3,670)
Impact of foreign currency translation		(103)		(47)		14
Balance, end of year	$	2,186	$	2,048	$	1,778

The increase in the warranty reserve from fiscal 2014 to 2015 included $241,000 of warranty obligations assumed as part of the acquisitions of Milltronics and Takumi. The increase from fiscal 2013 to 2014 reflected higher sales volumes and anticipated claims of machines under warranty as well as the sale of a greater number of our higher-performance machines which have a higher cost per claim.