Evaluation of the FASB's Proposed Accounting and Disclosure Requirements for Guarantors

The May 22, 2002 FASB Exposure Draft, Guarantor's Accounting and Disclosure Requirements, Including Indirect Guarantees of Indebtedness of Others (ED), addresses initial recognition, initial measurement, and disclosure issues related to guarantees. While the ED is not explicit on the nature of...

Full description

Saved in:
Bibliographic Details
Published in:Accounting horizons 2003-03, Vol.17 (1), p.51-58
Main Authors: Maines, Laureen A, Bartov, Eli, Fairfield, Patricia M, Hirst, D. Eric, Iannaconi, Teresa E, Mallett, Russell, Schrand, Catherine M, Skinner, Douglas J, Vincent, Linda
Format: Article
Language:English
Subjects:
Accounting
Balance sheets
Capital markets
Committees
Contingent liabilities
Disclosure
FASB exposure drafts
FASB statements
Financial accounting standards
Financial disclosure
Financial statements
Guarantees
Investments
Laws, regulations and rules
Liability
Pensions
Valuation
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:The May 22, 2002 FASB Exposure Draft, Guarantor's Accounting and Disclosure Requirements, Including Indirect Guarantees of Indebtedness of Others (ED), addresses initial recognition, initial measurement, and disclosure issues related to guarantees. While the ED is not explicit on the nature of the noncontingent liability, it is best characterized as deferred revenue for most guarantees. The ED raises issues related to valuation of contingent liabilities, financial statement vs. footnote disclosure, and the effects of increased footnote disclosure. Capital markets research provides evidence that contingent liabilities are relevant to capital market participants' valuation decisions. Research indicates that footnote disclosures on contingent liabilities are value-relevant. Experimental research suggests that the distinction between recognition and disclosure can affect the judgments and decisions of financial statement users. The AAA Financial Accounting Standards Committee believes that increased disclosure about guarantees will benefit users of financial statements by illuminating commitments made by companies and the associated risks of those commitments.
ISSN:0888-7993
1558-7975
DOI:10.2308/acch.2003.17.1.51