Non-Profit Organizations Reminded to Follow FIN 45 When Making Loan Guarantees

CPA Letter, The, December, 2007 by Anonymous

Non-profit organizations are reminded that FASB Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, applies to loan guarantees made by NPOs, even guarantees made without receiving commensurate consideration in exchange. For example, NPO Foundation A may guarantee the debt of NPO Cause B, without receiving commensurate consideration in exchange, to assist NPO Cause B in obtaining bank financing at a reasonable cost. NPO Foundation A's accounting for providing such guarantees is covered by FIN 45 (www.fasb.org/pdf/fin 45.pdf). The interpretation would require NPO Foundation A to recognize a liability for the guarantee, even in circumstances in which it is not probable that payments will be...

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