Financial guarantee treatment under indas


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.


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 ?

Coaching and Practice in Tax Audit Law.

Since company is Guarantor so it has to show in Notes to Accounts amount of guarantee given i.e loan taken by members and who all have taken loan and respective amounts specifying repayment by company in case of default by such parties.

It will be treated as Contingent Liability

IAS 37 applicable



Ceratin clartification will be required to understand transaction better

Whether Company P is financial institution and if not why company P has provided guarantee to unrelated parties?

By reading nature of tranasction it appears to be financial guarantee confirm the fact





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