Claim data used in combination with other known

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claim data used in combination with other known factors that may affect future warranty claims. The Company updates its warranty estimates quarterly to ensure that the warranty reserves are based on the most current information available. The Company believes that past claim experi- ence is indicative of future claims; however, the factors affecting actual claims can be volatile. As a result, actual claims experience may differ from estimated which could lead to material changes in the Company's warranty provision and related reserves ... The Company currently provides a standard two-year limited warranty on all new motorcycles sold worldwide, except for Japan, where the Company provides a standard three-year limited warranty on all new motorcycles sold. The warranty coverage for the retail customer includes parts and labor and generally begins when the motorcycle is sold to a retail customer. The Company maintains reserves for future warranty claims using an estimated cost per unit sold, which is based primarily on historical Company claim information. Additionally, the Company has from time to time initiated certain voluntary safety recall campaigns. The Company reserves for all estimated costs associated with safety recalls in the period that the safety recalls are announced. Changes in the Company'swarranty and safety recall liability were as follows (in thousands): Warranty and Safety Recall Liability (in thousands) 2010 2009 2008 $68,044 36,785 (58,067) 7,372 $54,134 $64,543 51,336 (74,022) 26,187 $68,044 $70,523 52,645 (71,737) 13,112 $64,543 Balance, beginning of period . Warranties issued during the period . Settlements made during the period . Recalls and changes to pre-existing warranty liabilities . Balance, end of period . Of the $68,044 thousand balance at the beginning of 2010, Harley incurred costs of $58, thousand to replace or repair defective motorcycles during 2010. This reduced Harley's liabili by that amount. These costs include cash paid to customers, or to employees as wages, and cost of parts used for repairs. Harley accrued an additional $44,157 thousand ($36,785 thous + $7,372 thousand) in new warranty liabilities in 2010. It is important to understand that onl increase in the liability resulting from additional accruals impacts the income statement, reduci _ income through additional warranty expense. Payments made to settle warranty claims do affect current-period income; they merely reduce the preexisting liability. GAAP requires that the warranty liability reflects the estimated amount of cost that company expects to incur as a result of warranty claims. This is often a difficult estimate : make and is prone to error. There is also the possibility that a company might underesti its warranty liability to report higher current income, or overestimate it so as to depress cu income and create an additional liability on the balance sheet (cookiejar reserve) that can used to absorb future warranty costs and, thus, to reduce future expenses. The overestimari would shift income from the current-period to one or more future periods. Warranty liabili .
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