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