Fossil Group, Inc. | 2013 | FY | 3

4. Warranty Reserve

        The Company's warranty liabilities are primarily related to watch products. The Company's FOSSIL® watch products sold in the U.S. are covered by a limited warranty against defects in materials or workmanship for a period of 11 years from the date of purchase. RELIC® watch products sold in the U.S. are covered by a comparable 12 year warranty, while certain other watches sold by the Company are covered by a comparable two year limited warranty. SKAGEN branded watches are covered by a lifetime warranty against defects due to faulty material or workmanship subject to normal conditions of use. The Company's warranty liability is recorded using historical warranty repair expense. As changes in warranty costs are experienced, the warranty accrual is adjusted as necessary. Warranty liability activity consisted of the following (in thousands):

Fiscal Year
  2013   2012   2011  

Beginning balance

  $ 13,383   $ 10,996   $ 8,534  

Settlements in cash or kind

    (10,672 )   (6,945 )   (7,025 )

Warranties issued and adjustments to preexisting warranties(1)

    12,607     8,737     9,487  

Liabilities assumed in acquisition

    340     595     0  

Ending balance

  $ 15,658   $ 13,383   $ 10,996  

Changes in cost estimates related to preexisting warranties are aggregated with accruals for new standard warranties issued and foreign currency changes.