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ASC 460 does not prescribe a method for subsequently measuring and recording the noncontingent guarantee liability. As stated in ASC 460-10-35-1, the guarantee liability should generally be reduced by recording a credit to net income as the guarantor is released from the guaranteed risk.
ASC 460-10-35-2 discusses three methods that can be used to subsequently recognize the guarantor’s release from risk.

Excerpt from ASC 460-10-35-2

Depending on the nature of the guarantee, the guarantor’s release from risk has typically been recognized over the term of the guarantee using one of the following three methods:
a. Only upon either expiration or settlement of the guarantee
b. By a systematic and rational amortization method
c. As the fair value of the guarantee changes.

ASC 460 does not provide guidance regarding when each of these methods should be used. A reporting entity should determine which method is most appropriate based on the nature of each guarantee. For example, the risk related to a guarantee of amortizing debt may be reduced as each payment is made. Therefore, a systematic and rational amortization method based on when the payments are made may be appropriate. A guarantor should not recognize a guarantee at fair value each period, as discussed in ASC 460-10-35-2(c), unless carrying the guarantee at fair value is appropriate based on other US GAAP (i.e., the guarantee should be accounted for under ASC 815 or the fair value option is elected).
In addition to subsequently measuring and recognizing the noncontingent component of a guarantee as discussed above, a reporting entity should continually assess the contingent component of the guarantee. The contingent component of a guarantee should be recognized using the guidance in ASC 450, unless the guarantee meets the definition of a derivative under ASC 815, is within the scope of ASC 326-20, or is considered an insurance contract under ASC 944. If so, the contingency should be accounted for using those standards. See DH 2 for further information on the definition of a derivative.
If recognition of a contingent component is required, a reporting entity should record it at the amount required by ASC 450, less the current carrying amount of the noncontingent component recognized in accordance with ASC 460. A reporting entity should separately track these components and account for them in accordance with their respective subsequent accounting guidance.

2.7.1 Subsequent accounting for a guarantee under ASC 326

The guidance regarding the subsequent measurement of a guarantee in ASC 460-10-35-4 will be amended when the guidance in ASC 326 becomes effective.

Excerpt from ASC 460-10-35-4 (as amended)

For guarantees within the scope of Subtopic 326-20, the expected credit losses (the contingent aspect) of the guarantee shall be accounted for in accordance with that Subtopic in addition to and separately from the fair value of the guarantee liability (the noncontingent aspect) accounted for in accordance with paragraph 460-10-30-5.

See LI 7 and LI 13 for more information on the application and effective dates of ASC 326.

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