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 July 31, 2016, we had 22 outstanding third party payment guarantees totaling approximately $1.3 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 certain components 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):

	Nine Months Ended
	July 31, 2016		July 31, 2015
Balance, beginning of period	$	2,186	$	2,048
Provision for warranties during the period		1,916		2,804
Charges to the reserve		(2,315)		(2,466)
Impact of foreign currency translation		(11)		(83)
Balance, end of period	$	1,776	$	2,303

The year-over-year decrease in our warranty reserve was primarily due to an overall reduction of machines under warranty as a result of reduced sales of the Hurco product line in North America, England and Asia Pacific.