I'm going to go out on a limb and guess that you aren't a CPA. They aren't "pre-announcing" a 1 billion dollar hit. They've extended the Xbox 360's warranty to 3 years, which covers every single 360 currently in a home. Now, because they've done this FASB's accounting standards state that they must recognize a liability for the potential cost to the company if all these warranties are called in. I would expect the actual hit to their bottom line from Warranty Expenses will be less than this 1 billion figure, and that will be spread out over next few years. So it doesn't just hit them this year to help make next year profitable, as they can have expenses from this 3 year warranty easily hit next year and the year after as well.