Wiley GAAP 2015: Interpretation and Application of Generally Accepted Accounting Principles 2015

Chapter 32ASC 460 GUARANTEES

PERSPECTIVE AND ISSUES

   Subtopic

   Scope and Scope Exceptions

   Overview

DEFINITIONS OF TERMS

CONCEPTS, RULES, AND EXAMPLES

   Guarantees

   Product Warranties

   Other Sources

PERSPECTIVE AND ISSUES

Subtopic

ASC 460, Guarantees, consists of one subtopic:

• ASC 460-10, Overall, which provides requirements to be met by a guarantor for certain guarantees issued and outstanding.

ASC 460-10 has two Subsections:

• General, which discusses the guarantor's recognition and disclosure of a liability at the inception of a guarantee
• Product Warranties.

Additional sources of guidance are listed in the Other Sources section at the end of this chapter.

Scope and Scope Exceptions

ASC 460 applies to all entities. ASC 460 applies to guarantee contracts that contingently require the guarantor to make payments (either in cash, financial instruments, shares of its stock, other assets or in services) to the guaranteed party based on any of the following circumstances (ASC 460-10-15-4):

1. Changes in a specified interest rate, security price, commodity price, foreign exchange rate, index of prices or rates, or any other variable, including the occurrence or nonoccurrence of a specified event that is related to an asset or liability of the guaranteed party. For example, the provisions apply to the following, as cited by ASC 460:
   1. A financial standby letter of credit
   2. A market value guarantee on either securities (including the common stock of the guaranteed party) ...