Treatement of Bank Gurantess in the Financial Statements

A Bank Guarantee is similar to a Letter of credit in that they both instil confidence in the transaction and participating parties. However the main difference is that Letters of Credit ensure that a transaction goes ahead, whereas a Bank Guarantee reduces any loss incurred if the transaction does not go to plan.

not treated in financial statements because it is credit protection, just like how an insurance is recognised in financial statements but not the benefits or future claims  from it.