Published: January, 2022
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:
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 provides an overview of the accounting, reporting, and disclosure requirements related to guarantees as prescribed by ASC Topic 460.
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Advisor, Kelen Camehl CPA
Kelen is a recognized author and reviewer of CPE courses and has authored over 85 courses (225+ CPE credit hours) covering a range of accounting, auditing, financial reporting, regulatory, and ethics topics. His courses are available for purchase from many online CPE providers including the AICPA. Kelen has also remained involved in CPA exam content development for nearly 10 years and has authored more than a thousand multiple choice questions for various sections of the CPA exam. He also serves as an Editorial Advisor for the AICPA’s "Journal of Accountancy".
Kelen has over 15 years of progressive finance and accounting experience. He currently serves as an Accounting Policy Consultant with HP, Inc. in Dallas, TX. Most recently he was located in Budapest, Hungary on a three-year international assignment and served in the company’s Houston, TX location prior to this assignment. Prior to HP, he served in multiple accounting roles in the oil & gas industry with ConocoPhillips including technical accounting policy, SOX compliance, and internal audit. He also gained public accounting experience with PricewaterhouseCoopers, working with various clients in the energy, electric, power, gas, and utility sectors.