performance guarantee

Save Share

This query is : Resolved

Dhavan Gavaral (Querist)
Follow

15 April 2010 Whether performance guaranty given by a corporate (Private Company) is required to be disclosed as contingent liability in notes on accounts.

Thanks

CA. B.SRINIVASULU

CA. B.SRINIVASULU (Expert)
Follow

15 April 2010 Yes. It is compulsiory.

Dhavan Gavaral

Dhavan Gavaral (Querist)
Follow

15 April 2010 Any specific paragraph in Sch VI disclosure requirement which you may want to refer in case of compulsry disclosure.

Rasesh

Rasesh (Expert)
Follow

15 April 2010 In my view, performance guarantee should be included in contingent liabilities only if they are issued by your banker at your instruction. Likewise letter of credits issued by banks should also be included.

If the performance guarantee is simply given on your letter head, no need to include it.

I will try to locate the exact reference.

Dhavan Gavaral

Dhavan Gavaral (Querist)
Follow

16 April 2010 It is issued by banker. However, the event of liability will arise only in case of default of performance which will have to be assessed/agreed by both the parties. In my view, from the point of default in performance and upto the point of settlement of default, the liability will be treated as contingent and giving performance guarantee as a contractual obligation may not result in guarantee being a contingent in nature upto the point of default in performance.

Rasesh

Rasesh (Expert)
Follow

16 April 2010 Should be included.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now