Financial guarantee treatment under indas

vikas garg (1 Points)

17 August 2018  

Hi

Example: 'Company P' gives a Corporate guarantee to 'Bank B' against Working capital facilities extended to multiple Buyers of Company P. The nature of the guarantee is such that if these buyers fails to repay Bank B on time, then Company P shall pay Bank B after it is overdue for 30 days. All these are unrelated parties to Company P.

Que: 

1. How will 'Company P' treat this arrangement in its financials?

2. Will it be treated as Contingent Liability / Liability?

3. Which sections would apply for this treatment under IndAS/IFRS?

4. What will be the value of this Liability ?