cisco-annual-report-2021

We also have certain funding commitments, primarily related to our privately held investments, some of which are based on
the achievement of certain agreed-upon milestones, and some of which are required to be funded on demand. The funding
commitments were $0.2 billion and $0.3 billion as of July 31, 2021 and July 25, 2020, respectively.
(c)
Product Warranties
The following table summarizes the activity related to the product warranty liability (in millions):
July 31, 2021 July 25, 2020 July 27, 2019
Balance at beginning of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 331 $ 342 $ 359
Provisions for warranties issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 496 561 600
Adjustments for pre-existing warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (8) (12)
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (491) (564) (603)
Acquisitions and divestitures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — (2)
Balance at end of fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 336 $ 331 $ 342
We accrue for warranty costs as part of our cost of sales based on associated material product costs, labor costs for technical
support staff, and associated overhead. Our products are generally covered by a warranty for periods ranging from 90 days to
five years, and for some products we provide a limited lifetime warranty.
(d)
Financing and Other Guarantees
In the ordinary course of business, we provide financing guarantees for various third-party financing arrangements extended
to channel partners and end-user customers. Payments under these financing guarantee arrangements were not material for the
periods presented.
Channel Partner Financing Guarantees We facilitate arrangements for third-party financing extended to channel partners,
consisting of revolving short-term financing, with payment terms generally ranging from 60 to 90 days. These financing
arrangements facilitate the working capital requirements of the channel partners, and, in some cases, we guarantee a portion of
these arrangements. The volume of channel partner financing was $26.7 billion, $26.9 billion, and $29.6 billion in fiscal 2021,
2020, and 2019, respectively. The balance of the channel partner financing subject to guarantees was $1.3 billion and $1.1 billion
as of July 31, 2021 and July 25, 2020, respectively.
End-User Financing Guarantees We also provide financing guarantees for third-party financing arrangements extended to enduser
customers related to leases and loans, which typically have terms of up to three years. The volume of financing provided by
third parties for leases and loans as to which we had provided guarantees was $10 million, $9 million, and $14 million in fiscal
2021, 2020, and 2019, respectively.
Financing Guarantee Summary The aggregate amounts of financing guarantees outstanding at July 31, 2021 and July 25, 2020,
representing the total maximum potential future payments under financing arrangements with third parties along with the
related deferred revenue, are summarized in the following table (in millions):
July 31, 2021 July 25, 2020
Maximum potential future payments relating to financing guarantees:
Channel partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 155 $ 198
End user . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 9
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 160 $ 207
Deferred revenue associated with financing guarantees:
Channel partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (16) $ (19)
End user . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5) (9)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (21) $ (28)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 139 $ 179
(e)
Indemnifications
In the normal course of business, we have indemnification obligations to other parties, including customers, lessors, and parties
to other transactions with us, with respect to certain matters. We have agreed to indemnify against losses arising from a breach
of representations or covenants or out of intellectual property infringement or other claims made against certain parties. These
agreements may limit the time or circumstances within which an indemnification claim can be made and the amount of the
claim.
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