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Chapter 11 - Solution Manual

The pronouncement that clarified the issue was fin 45

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The pronouncement that clarified the issue was FIN 45. Found by using the Print with Sources function [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: [FIN 45, paragraph 13, sequence 80.1] ] a. [The nature of the guarantee, including all of the following: [FIN 45, paragraph 13, sequence 81.1] ] 1. [The approximate term of the guarantee [FIN 45, paragraph 13, sequence 81.2.1] ] 2. [How the guarantee arose [FIN 45, paragraph 13, sequence 81.2.2.1] ] 3. [The events or circumstances that would require the guarantor to perform under the guarantee [FIN 45, paragraph 13, sequence 81.2.2.2] ] 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 recently issued external credit ratings or current internal groupings used by the guarantor to manage its risk) [FIN 45, paragraph 13, sequence 81.2.2.2.2.1.1] ] 5. [If the entity uses internal groupings for purposes of item (a)(4), how those groupings are determined and used for managing risk. [FIN 45, paragraph 13, sequence 81.2.2.2.2.1.2] ] b. All of the following information about the maximum potential amount of future payments under the guarantee: 1. [The maximum potential amount of future payments (undiscounted) that the guarantor could be required to make under the guarantee, which [FIN 45, paragraph 13, sequence 82.1] ][ 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)) [FIN 45, paragraph 13, sequence 82.2.1] ] 2. [If the terms of the guarantee provide for no limitation to the maximum potential future payments under the guarantee, that fact [FIN 45, paragraph 13, sequence 82.2.2.1] ] 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. [FIN 45, paragraph 13, sequence 82.2.2.2.1] ] 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 [FIN 45, paragraph 13, sequence 83] ] 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 [FIN 45, paragraph 13, sequence 84.1] ]
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232 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 [FIN 45, paragraph 13, sequence 84.2.1] ] f. [If estimable, the approximate extent to which the proceeds from liquidation of assets held either
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