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A guarantor may guarantee financial or operational performance for a number of reasons. Common types of guarantees include financial guarantees, performance guarantees, indemnifications, and indirect guarantees of another entity’s debt. Guarantees are often embedded in purchase or sales agreements, service contracts, joint venture agreements, or other commercial arrangements.
A joint and several liability is an obligation of several parties that is enforceable, for the full amount of the obligation, against any one of the parties. For example, in a joint and several debt obligation, the lender can demand payment in accordance with the terms of the debt for the total amount of the obligation from any one, or a combination, of the obligors. Reporting entities under common control may be jointly and severally liable for an obligation; but so may unrelated reporting entities.
This chapter discusses the accounting considerations associated with guarantees from the perspective of the guarantor. It also discusses the accounting considerations for joint and several liability arrangements. This chapter does not discuss disclosure requirements. See FSP 23 for information related to disclosures.

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