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GUARANTEES AND PRODUCT WARRANTIES

12 Months Ended

Oct. 31, 2022

11. 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, 2022, we had nine outstanding third party payment guarantees totaling approximately $0.7 million. The terms of these guarantees are consistent with the underlying customer financing terms. Upon shipment of a machine, the customer assumes 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 for each of the last three fiscal years is as follows (in thousands):


	2022		2021		2020
Balance, beginning of period	$	1,516	$	1,200	$	1,760
Provision for warranties during the period		2,915		2,948		2,075
Charges to the reserve		(2,877)		(2,643)		(2,669)
Impact of foreign currency translation		(128)		11		34
Balance, end of period	$	1,426	$	1,516	$	1,200

The decrease in our warranty reserve from fiscal year 2021 to fiscal year 2022 was primarily due to the impact of foreign currencies when translating foreign reserves to US. dollars for financial reporting purposes. Excluding the impact of foreign currencies, warranty reserve increased slightly as a result of increased shipments of higher-performance five-axis machines. The increase in our warranty reserve from fiscal year 2020 to fiscal year 2021 was primarily due to an increase in the number of machines under warranty from increased sales volume in fiscal year 2021.