04-05-2011, 04:03 PM
Agreed~
Dada Bank mein contingency and commitment non funded exposure ki hote hai like letter of credit,letter of gurantee etc etc....
so there are no funds involved ...means the bank has commited to pay if the actual party defaults but as the actual party has not defaulted thus it appears in contingencies rather than liabilities...
liabilities are never imparied!!! if there is uncertaininty!!!! we would book provision and make reversals later once actual billing is done....
when no uncertainity of timing and amount is involved we book liability.
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by moniacca</i>
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The term contingencies and commitments appears near the end of a balance sheet without an amount in order to direct a readerâs attention to the disclosures included in the "notes to the financial statements". No provision can be recognised.
An amount is not shown for a variety of reasons. For example, a chain of retail stores may have signed five-year, noncancellable leases to rent retail space for $1 million per year. This commitment needs to be disclosed to the readers of the balance sheet. However, if none of the $5 million is actually due as of the balance sheet date, there is no liability amount to be recorded in a liability account.
I hope my reply will help you
Comments are appreciated.
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
Dada Bank mein contingency and commitment non funded exposure ki hote hai like letter of credit,letter of gurantee etc etc....
so there are no funds involved ...means the bank has commited to pay if the actual party defaults but as the actual party has not defaulted thus it appears in contingencies rather than liabilities...
liabilities are never imparied!!! if there is uncertaininty!!!! we would book provision and make reversals later once actual billing is done....
when no uncertainity of timing and amount is involved we book liability.
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by moniacca</i>
<br />
The term contingencies and commitments appears near the end of a balance sheet without an amount in order to direct a readerâs attention to the disclosures included in the "notes to the financial statements". No provision can be recognised.
An amount is not shown for a variety of reasons. For example, a chain of retail stores may have signed five-year, noncancellable leases to rent retail space for $1 million per year. This commitment needs to be disclosed to the readers of the balance sheet. However, if none of the $5 million is actually due as of the balance sheet date, there is no liability amount to be recorded in a liability account.
I hope my reply will help you
Comments are appreciated.
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