Debt guarantees are:
A)Never disclosed in the financial statements.
B)Considered to be contingent liabilities.
C)A bad business practice.
D)Recorded as liabilities even though it is highly unlikely that the original debtor will default.
E)Considered to be an unearned revenue.

Question

Quizplus · Accepted Answer

Debt guarantees are contingent liabilities because they represent a potential obligation that may or may not occur depending on the actions of another party (the debtor). They must be disclosed in the financial statements, usually in the footnotes, as they can have a significant impact on the financial position of the guarantor.

Debt Guarantees Are