Wiley GAAP 2024

32ASC 460 GUARANTEES

• Perspective and Issues
  • Overview
  • Subtopic
  • Scope and Scope Exceptions
    • General
    • Product Warranties
• Definitions of Terms
• Concepts, Rules, and Examples
  • General
    • Recognition
    • Initial Measurement
    • Example of Estimating the Fair Value of a Guarantee Using CON 7 When Recognition of a Loss Contingency under ASC 450 Would Not Be Otherwise Required
    • Example of Estimating the Fair Value of a Guarantee Using CON 7 When Recognition of a Loss Contingency under ASC 450 Is Also Required
    • Subsequent Measurement
  • Product Warranties
    • Recognition
    • Example of Product Warranty Expense
  • Other Sources

PERSPECTIVE AND ISSUES

Overview

ASC 460 provides guidance for guarantors on the accounting and reporting requirements of certain guarantee obligations. The Scope section below includes extensive guidance on what guarantees are and are not included. Certain guarantees require the guarantor to record a liability at fair value. Others require only disclosure initially. Guarantees embody two separate obligations:

1. The contingent obligation to make future payments under the guarantee in the event of nonperformance by the party whose obligation is guaranteed, and
2. An obligation to be ready to perform, referred to as a standby obligation, during the period that the guarantee is in effect.

As a result of this bifurcation of the obligation, many guarantees are now required to be recognized as liabilities on the balance sheet.

Subtopic

ASC 460, Guarantees, consists of one subtopic: ...