Chapter 11 - Solution Manual

Disclosures about a guarantors obligation 4 a

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> > Disclosures About a Guarantor's Obligation 460-10-50-4 A guarantor shall disclose all of the following information about each guarantee, or each group of similar guarantees, even if the likelihood of the guarantor’s having to make any payments under the guarantee is remote: a. The nature of the guarantee, including the approximate term of the guarantee, how the guarantee arose, and the events or circumstances that would require the guarantor to perform under the guarantee b. The following information about the maximum potential amount of future payments under the guarantee, as appropriate:
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229 1. The maximum potential amount of future payments (undiscounted) that the guarantor could be required to make under the guarantee, which shall not be reduced by the effect of any amounts that may possibly be recovered under recourse or collateralization provisions in the guarantee (which are addressed under (d) and (e)) 2. If the terms of the guarantee provide for no limitation to the maximum potential future payments under the guarantee, that fact 3. If the guarantor is unable to develop an estimate of the maximum potential amount of future payments under its guarantee, the reasons why it cannot estimate the maximum potential amount. c. The current carrying amount of the liability, if any, for the guarantor’s obligations under the guarantee (including the amount, if any, recognized under Section 450-20-30), regardless of whether the guarantee is freestanding or embedded in another contract d. The nature of any recourse provisions that would enable the guarantor to recover from third parties any of the amounts paid under the guarantee e. The nature of any assets held either as collateral or by third parties that, upon the occurrence of any triggering event or condition under the guarantee, the guarantor can obtain and liquidate to recover all or a portion of the amounts paid under the guarantee f. If estimable, the approximate extent to which the proceeds from liquidation of assets held either as collateral or by third parties would be expected to cover the maximum potential amount of future payments under the guarantee. See the Product Warranties Subsection of Section 460–10–50 for an exception to the requirements of (b). Pending Content: Transition Date: November 15, 2008 Transition Guidance: 815-10-65-2 A guarantor shall disclose all of the following information about each guarantee, or each group of similar guarantees, even if the likelihood of the guarantor’s having to make any payments under the guarantee is remote: a. The nature of the guarantee, including all of the following: 1. The approximate term of the guarantee 2. How the guarantee arose 3. The events or circumstances that would require the guarantor to perform under the guarantee 4. The current status (that is, as of the date of the statement of financial position) of the payment/performance risk of the guarantee (for example, the current status of the payment/performance risk of a credit-risk-related guarantee could be based on either
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