On 9 March 2018, the Accounting Standards Council (ASC) issued Singapore Financial Reporting Standard for Small Entities – Q&A Section 12, Issue 1 on Accounting for financial guarantee contracts in individual or separate financial statements of issuer.
The Q&A is published to provide non-mandatory and timely guidance on specific accounting questions that are being raised in the implementation of the Singapore Financial Reporting Standard for Small Entities.
The Q&A Section 12, Issue 1 can be found as follows:
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Issue |
Response |
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A reporting entity prepares its financial statements applying the Singapore Financial Reporting Standard for Small Entities. The reporting entity guarantees repayment of a loan from a bank to another entity (a financial guarantee contract). An example of where this might commonly arise is when both entities are under common control. How does the reporting entity account for the financial guarantee contract issued to the bank in its separate or individual financial statements? |
The reporting entity shall account for the financial guarantee contract by applying the requirements in Section 12 Other Financial Instrument Issues — unless the reporting entity chooses to apply the recognition and measurement requirements of FRS 39 Financial Instruments: Recognition and Measurement (as permitted by paragraphs 11.2(b) and 12.2(b) of the Singapore Financial Reporting Standard for Small Entities). Financial guarantee contracts frequently have characteristics commonly associated with insurance contracts. The accounting treatment outlined in this Q&A should not be assumed to apply to other types of insurance contracts |
Source: ASC, 10 March 2018