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Forensic Accounting

Corporate guarantees given to a subsidiary


If a parent company provides a corporate guarantee for a bank on behalf of a fully owned subsidiary, what are the IFRS accounting implications to the parent company's accounts ? For example, a parent company provides a guarantee for $5 Million on commercial papers issued by a subsidiary. How do you account for this guarantee in parent's book.

asked Apr 26, 2013 in IAS 39 - Financial Instruments: Recognition and Measurement by anonymous

3 Answers

+1 vote
This should be recognized in parent's accounts as per IAS39. This is an intra-group financial guarantee contract, which is included in the scope of financial instruments. Initial measurement should be at fair value and subsequently measured at the higher of the actual value of guarantee and initial fair value determined less cumulative amortization.
answered Apr 29, 2013 by anonymous
0 votes
I support the question. I believe the CG should be mentioned in the contingent liabilities in the balance sheet of the parent company. However, it is to the auditors to decide, after they have reviewed the wording of the CG. Wording can affect heavily the meaning and impact of any CG, ranging from a comfort letter to support letter to strict CG with straight forward wording dictated by the bank.
answered Apr 28, 2013 by anonymous
0 votes
It should be shown under contingent liability only.
answered Apr 14, 2015 by anonymous



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