{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/460/10/#25-recognition","source":"FASB Accounting Standards Codification, Basic View","usage":"Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective.","topic":"460","topic_title":"Guarantees","subtopic":"460-10","subtopic_title":"Overall","section":{"number":"25","label":"25 Recognition","anchor":"25-recognition","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"460-10-25-1","para":"25-1","html":"
The following types of guarantees are not subject to the recognition provisions of this Subsection:
  1. a
    A guarantee that is accounted for as a derivative instrument at fair value under Topic 815.
  2. b
    A product warrantyor other guarantee for which the underlying is related to the performance (regarding function, not price) of nonfinancial assets that are owned by the guaranteed party (see paragraph 460-10-15-9 for related guidance).
  3. c
    A guarantee issued in a business combination or an acquisition by a not-for-profit entity that represents contingent consideration (as addressed in Subtopics 805-30 and 958-805).
  4. d
    A guarantee for which the guarantor's obligation would be reported as an equity item rather than a liability under generally accepted accounting principles (GAAP) (see Topics 480 and 505).
  5. e
    A guarantee by an original lessee that has become secondarily liable under a new lease that relieved the original lessee from being the primary obligor (that is, principal debtor) under the original lease, as discussed in paragraph 842-20-40-3. This exception shall not be applied by analogy to other secondary obligations.
  6. f
    A guarantee issued either between parents and their subsidiaries or between corporations under common control.
  7. g
    A parent's guarantee of its subsidiary's debt to a third party (whether the parent is a corporation or an individual).
  8. h
    A subsidiary's guarantee of the debt owed to a third party by either its parent or another subsidiary of that parent.
","snippet":"The following types of guarantees are not subject to the recognition provisions of this Subsection:\n(a) A guarantee that is accounted for as a derivative instrument at fair value under Topic 815.\n(b) A product warrantyor…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:86ba25c30a2d1b304785609e54af15577d433bc0304b62636443ecb0792225b6","downloaded_from":"2026-09-10T00:29:39.283Z","last_downloaded_at":"2026-09-10T00:29:39.283Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482050","source_sha256":"3cc90779122eea4c811d43602470ab9350147a64f44fbc623913f1101d856476"}},{"citation":"460-10-25-2","para":"25-2","html":"
The issuance of a guarantee obligates the guarantor (the issuer) in two respects:
  1. a
    The guarantor undertakes an obligation to stand ready to perform over the term of the guarantee in the event that the specified triggering events or conditions occur (the noncontingent aspect).
  2. b
    The guarantor undertakes a contingent obligation to make future payments if those triggering events or conditions occur (the contingent aspect).
For guarantees that are not within the scope of Subtopic 326-20 on financial instruments measured at amortized cost, no bifurcation and no separate accounting for the contingent and noncontingent aspects of the guarantee are required by this Topic. For guarantees that are within the scope of Subtopic 326-20, the expected credit losses (the contingent aspect) shall be measured and accounted for in addition to and separately from the fair value of the guarantee (the noncontingent aspect) in accordance with paragraph 460-10-30-5.
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Because the issuance of a guarantee imposes a noncontingent obligation to stand ready to perform in the event that the specified triggering events or conditions occur, the provisions of Section 450-20-25 regarding a guarantor's contingent obligation under a guarantee should not be interpreted as prohibiting a guarantor from initially recognizing a liability for a guarantee even though it is not probable that payments will be required under that guarantee. Similarly, for guarantees within the scope of Subtopic 326-20, the requirement to measure a guarantor's expected credit loss on the guarantee should not be interpreted as prohibiting a guarantor from initially recognizing a liability for the noncontingent aspect of a guarantee.
","snippet":"Because the issuance of a guarantee imposes a noncontingent obligation to stand ready to perform in the event that the specified triggering events or conditions occur, the provisions of Section 450-20-25 regarding a guar…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e53f6d4d1dec13b0c5efd9003fdb886ad24fd98fe81dbfb379de06732a637209","downloaded_from":"2026-09-10T00:29:39.283Z","last_downloaded_at":"2026-09-10T00:29:39.283Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482050","source_sha256":"3cc90779122eea4c811d43602470ab9350147a64f44fbc623913f1101d856476"}},{"citation":"460-10-25-4","para":"25-4","html":"
At the inception of a guarantee, a guarantor shall recognize in its statement of financial position a liability for that guarantee. This Subsection does not prescribe a specific account for the guarantor's offsetting entry when it recognizes a liability at the inception of a guarantee. That offsetting entry depends on the circumstances in which the guarantee was issued. See paragraph 460-10-55-23 for implementation guidance.
","snippet":"At the inception of a guarantee, a guarantor shall recognize in its statement of financial position a liability for that guarantee. This Subsection does not prescribe a specific account for the guarantor's offsetting ent…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d97a45553591887c209b47c681d05553c5d13d5a26468264f867b4d931a5a822","downloaded_from":"2026-09-10T00:29:39.283Z","last_downloaded_at":"2026-09-10T00:29:39.283Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482050","source_sha256":"3cc90779122eea4c811d43602470ab9350147a64f44fbc623913f1101d856476"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e2d1d9679efd18aa379966b0da671c32577f303953a08a7ae135bd247004d753","downloaded_from":"2026-09-10T00:29:39.283Z","last_downloaded_at":"2026-09-10T00:29:39.283Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482050","source_sha256":"3cc90779122eea4c811d43602470ab9350147a64f44fbc623913f1101d856476"}},{"block":"Product Warranties","heading":"Warranty Obligations Incurred in Connection with the Sale of Goods or Services","paragraphs":[{"citation":"460-10-25-5","para":"25-5","html":"
Because of the uncertainty surrounding claims that may be made under warranties, warranty obligations fall within the definition of a contingency. Losses from warranty obligations shall be accrued when the conditions in paragraph 450-20-25-2 are met.
","snippet":"Because of the uncertainty surrounding claims that may be made under warranties, warranty obligations fall within the definition of a contingency. Losses from warranty obligations shall be accrued when the conditions in …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:82d623f5dca14e0f96437a87e0c40f496a83f4b10e2fe6fcc1fb77a8aab6dda0","downloaded_from":"2026-09-10T00:29:39.283Z","last_downloaded_at":"2026-09-10T00:29:39.283Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482050","source_sha256":"3cc90779122eea4c811d43602470ab9350147a64f44fbc623913f1101d856476"}},{"citation":"460-10-25-6","para":"25-6","html":"
The condition in paragraph 450-20-25-2(a) is met at the date of an entity's financial statements if, based on available information, it is probable that customers will make claims under warranties relating to goods or services that have been sold. Satisfaction of the condition in paragraph 450-20-25-2(b) will normally depend on the experience of an entity or other information. In the case of an entity that has no experience of its own, reference to the experience of other entities in the same business may be appropriate. Inability to make a reasonable estimate of the amount of a warranty obligation at the time of sale because of significant uncertainty about possible claims (that is, failure to satisfy condition [b] in that paragraph) precludes accrual and, if the range of possible loss is wide, may raise a question about whether a sale should be recorded before expiration of the warranty period or until sufficient experience has been gained to permit a reasonable estimate of the obligation.
","snippet":"The condition in paragraph 450-20-25-2(a) is met at the date of an entity's financial statements if, based on available information, it is probable that customers will make claims under warranties relating to goods or se…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:14e364f5a261419b0dde146c9f3b5b8994e264e7e9089bc88d42e82101044748","downloaded_from":"2026-09-10T00:29:39.283Z","last_downloaded_at":"2026-09-10T00:29:39.283Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482050","source_sha256":"3cc90779122eea4c811d43602470ab9350147a64f44fbc623913f1101d856476"}},{"citation":"460-10-25-7","para":"25-7","html":"
The conditions in paragraph 450-20-25-2 may be considered in relation to individual sales made with warranties or in relation to groups of similar types of sales made with warranties. If those conditions are met, accrual shall be made even though the particular parties that will make claims under warranties may not be identifiable.
","snippet":"The conditions in paragraph 450-20-25-2 may be considered in relation to individual sales made with warranties or in relation to groups of similar types of sales made with warranties. If those conditions are met, accrual…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0681853770b0e3718f7e030193a6b1c3464bb74208e7f706d06d8ca5f930fa95","downloaded_from":"2026-09-10T00:29:39.283Z","last_downloaded_at":"2026-09-10T00:29:39.283Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482050","source_sha256":"3cc90779122eea4c811d43602470ab9350147a64f44fbc623913f1101d856476"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d992cbc46f6ae8885680bb5ae17e9ba33ec4f0f0330a8ecce74605541c151d4b","downloaded_from":"2026-09-10T00:29:39.283Z","last_downloaded_at":"2026-09-10T00:29:39.283Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482050","source_sha256":"3cc90779122eea4c811d43602470ab9350147a64f44fbc623913f1101d856476"}},{"block":"Product Warranties","heading":"Separately Priced Extended Warranty or Product Maintenance Contracts","paragraphs":[{"citation":"460-10-25-8","para":"25-8","html":"
Topic 606 on revenue from contracts with customers, and specifically the guidance on warranties in paragraphs
606-10-55-30 through 55-35
, provide guidance on revenue recognition by sellers of extended warranty or product maintenance contracts and warranties that provide a customer with a service in addition to the assurance that the product complies with agreed-upon specifications.
","snippet":"Topic 606 on revenue from contracts with customers, and specifically the guidance on warranties in paragraphs 606-10-55-30 through 55-35, provide guidance on revenue recognition by sellers of extended warranty or product…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:77f509fc69f38d8399271b8dd191f578f8a1119ad7ffb981588d79c731f65767","downloaded_from":"2026-09-10T00:29:39.283Z","last_downloaded_at":"2026-09-10T00:29:39.283Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482050","source_sha256":"3cc90779122eea4c811d43602470ab9350147a64f44fbc623913f1101d856476"}},{"citation":"460-10-25-8A","para":"25-8A","html":"
Paragraph 605-20-25-6 provides guidance on recognizing a loss on separately priced extended warranty and product maintenance contracts.
","snippet":"Paragraph 605-20-25-6 provides guidance on recognizing a loss on separately priced extended warranty and product maintenance contracts.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:09016df9af1caa0644d12fb5223503a69f624816d60abb570ca023abdc18785f","downloaded_from":"2026-09-10T00:29:39.283Z","last_downloaded_at":"2026-09-10T00:29:39.283Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482050","source_sha256":"3cc90779122eea4c811d43602470ab9350147a64f44fbc623913f1101d856476"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5e9e1345681856d6bbfaf4b5939879ad5b161c2158dce51264e04f906d72394e","downloaded_from":"2026-09-10T00:29:39.283Z","last_downloaded_at":"2026-09-10T00:29:39.283Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482050","source_sha256":"3cc90779122eea4c811d43602470ab9350147a64f44fbc623913f1101d856476"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:09ccfd4ecee7ee207f5f5ea9397f7f2399bd5b4eb1cc883a3d8b140fc89a5444","downloaded_from":"2026-09-10T00:29:39.283Z","last_downloaded_at":"2026-09-10T00:29:39.283Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482050","source_sha256":"3cc90779122eea4c811d43602470ab9350147a64f44fbc623913f1101d856476"}},"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:09ccfd4ecee7ee207f5f5ea9397f7f2399bd5b4eb1cc883a3d8b140fc89a5444","downloaded_from":"2026-09-10T00:29:39.283Z","last_downloaded_at":"2026-09-10T00:29:39.283Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482050","source_sha256":"3cc90779122eea4c811d43602470ab9350147a64f44fbc623913f1101d856476"}}