Overview
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Indirect Guarantees of the Indebtedness of Others
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Transactions Outside the Scope of ASC Topic 460
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Initial Measurement – Noncontingent Portion
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Recognition of Guarantees
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Guarantor’s Obligations Disclosures
Course Description
What is a guarantee?
Guarantees are often included within certain purchase agreements, sales agreements, commercial agreements, and many other types of agreements.
Oddly enough, while the FASB has a dedicated ASC Topic for the accounting and reporting requirements related to guarantees, the FASB does not offer a concrete definition of the term guarantee. This is likely because there are so many different types of guarantees.
Within the context of ASC Topic 460, there are three primary types of guarantees:
- Financial guarantees
- Performance guarantees
- Indemnifications
ASC 460, Guarantees contains guidance on a guarantor’s accounting and disclosure requirements for particular guarantee obligations. It requires a reporting entity that makes certain types of guarantees to recognize a liability generally measured initially at fair value and to make several specified disclosures. For other types of guarantees, the guarantor is exempt from the initial recognition provisions but is still subject to the disclosure requirements.
Both financial and non-financial contracts can be guaranteed within the scope of ASC 460. The scope does not include guarantees that the guarantor should record in equity. Certain guarantees that are within the scope of ASC 460 also fall under the scope of the current expected credit loss (CECL) model in ASC 326, and thus must be assessed for expected credit losses.
This CPE webinar on Accounting provides an overview of the accounting, reporting, and disclosure requirements related to guarantees as prescribed by ASC Topic 460.
Learning Objectives
- To identify the primary types of guarantees.
- To recognize the guarantees that are within the scope of ASC Topic 460.
- To identify the recognition, measurement, and subsequent measurement requirements of guarantees.
- To analyze consideration of transactions within the scope of ASC Topic 326-20.
- To recognize key disclosure requirements for guarantees.
- To review real-world examples of policy disclosures.