Firms often have outstanding banker's assure for instance these provided in lieu of deposits, efficiency guarantees provided to clients and so forth. Such banker's guarantees usually do not meet the definition of contingent liabilities fall in FRS 37.
Assuring the Contingent Liability
The events that may well trigger payment by the banks are from the control from the Firm and are certainly not uncertain future events. The Firm will not have any present obligation till it defaults on payment of lease or fails to execute the contracts. These banker's guarantees really should not be described as contingent liabilities with the Firm within the financial statement.
