2.14. Financial guarantee contracts

The financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument.

When a financial guarantee contract is recognised initially, it is measured at the fair value. After initial recognition, an issuer of such a contract measures it at the higher of:

  • the amount determined in accordance with IAS 37 “Provisions, Contingent Liabilities and Contingent Assets”, and
  • the amount initially recognised less, when appropriate, cumulative amortization recognised in accordance with IAS 18 “Revenue”.