Provide answer A financial guarantee contract is initiallyrecognized at?a) The premium receivedb) Fair valuec) The higher of premium or expected credit lossd) The guaranteed amount

When a financial guarantee contract is first recognized, it is recorded at fair value in accordance…

Answered: A financial guarantee contract is…

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter8: Current And Contingent Liabilities

Section: Chapter Questions

Problem 1MCQ

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Accurate Answer
Accounting problem
A financial guarantee contract is initiatially recognized at
_____ is a contract that involves compensation for specific potential future losses in exchange for periodic payments and that provides for the transfer of the risk of a loss, from one entity to another, in exchange for a premium. a.Spot contract b.Insurance c.Hedging d. Forward contract
Counterparty credit risk is a function of the probability of default, exposure at default, and loss given default. Assuming that the individual exposure at default with a counterparty is fixed, which of the following statements is correct? A. The probability of default can be mitigated by collateral, and exposure at default can be mitigated by netting. B. The probability of default can be mitigated by netting, and exposure at default can be mitigated by collateral. C. Loss given default can be mitigated by collateral, and exposure at default can be mitigated by netting. D. Loss given default can be mitigated by netting, and exposure at default can be mitigated by collateral.
Loans and receivable should be measured subsequent to initial recognition at * a. Amortized cost using the straight line method b. Fair value c. Fair value plus transaction cost d. Amortized cost using the effective interest method
A funding component is O the total funding required for a specified decision point O a long-term source of capital O a collateral agreement, such as pledging an asset as security for a mortgage bond O an ancillary requirement on a loan that affects its risk, such as a restrictive covenant
Contingent liabilities must be recorded if: O The future event is probable and the amount owed can be reasonably estimated O The future event is remote O The future event is reasonably possible O The amount owed cannot be reasonably estimated All of the above
1. What are contingent liabilities and could you give some examples of contingent liabilities? Which two conditions have to be met in order to report a contingent liability on a balance sheet?
Contingent liabilities are obligations that may or may not materialize.
(7).

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A financial guarantee contract is initially recognized at? a) The premium received b) Fair value c) The higher of premium or expected credit loss d) The guaranteed amount