26 July 2011
If a Letter of Credit is backed by a Cash Collateral, do we need to reflect it as a footnote in the balance sheet again? In other words, will a contingent liability be booked on a letter of credit that is collateralised fully with cash Deposit? plz help,its urgent...
Contingent liability will be required to be disclosed even though the same has been backed by cash collateral. As a contingent liability can be an outflow of in form of payment of funds or it may be in the form of outflow of existing funds already with the bank.