# ASC 460-10-25: Guarantees — Overall — 25 Recognition Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/460/10/#25-recognition) 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. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-10T00:29:39.283Z to 2026-09-10T00:29:39.283Z Record version: sha256:09ccfd4ecee7ee207f5f5ea9397f7f2399bd5b4eb1cc883a3d8b140fc89a5444 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 460-10-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/460/10/#25-recognition) SEC content: no ##### [460-10-25-1](https://asc.understandingaccounting.org/asc/460/10/#460-10-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:29:39.283Z to 2026-09-10T00:29:39.283Z Record version: sha256:86ba25c30a2d1b304785609e54af15577d433bc0304b62636443ecb0792225b6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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 [warranty](https://asc.understandingaccounting.org/glossary/w/#warranty "A guarantee for which the underlying is related to the performance (regarding function, not price) of nonfinancial assets that are owned by the guaranteed party. The obligation may be incurred in connection with the sale of goods or services; if so, it may require further performance by the seller after the sale has taken place.")or other guarantee for which the [underlying](https://asc.understandingaccounting.org/glossary/u/#underlying "A specified interest rate, security price, commodity price, foreign exchange rate, index of prices or rates, or other variable (including the occurrence or nonoccurrence of a specified event such as a scheduled payment under a contract). An underlying may be a price or rate of an asset or liability but is not the asset or liability itself. An underlying is a variable that, along with either a notional amount or a payment provision, determines the settlement of a derivative instrument.") 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](https://asc.understandingaccounting.org/asc/460/10/#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](https://asc.understandingaccounting.org/glossary/a/#acquisition-by-a-not-for-profit-entity "A transaction or other event in which a not-for-profit acquirer obtains control of one or more nonprofit activities or businesses and initially recognizes their assets and liabilities in the acquirer's financial statements. When applicable guidance in Topic 805 is applied by a not-for-profit entity, the term business combination has the same meaning as this term has for a for-profit entity. Likewise, a reference to business combinations in guidance that links to Topic 805 has the same meaning as a reference to acquisitions by not-for-profit entities.") 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](https://asc.understandingaccounting.org/glossary/l/#lessee "An entity that enters into a contract to obtain the right to use an underlying asset for a period of time in exchange for consideration.") that has become secondarily liable under a new [lease](https://asc.understandingaccounting.org/glossary/l/#lease "A contract, or part of a contract, that conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration.") 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](https://asc.understandingaccounting.org/asc/842/20/#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. ##### [460-10-25-2](https://asc.understandingaccounting.org/asc/460/10/#460-10-25-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:29:39.283Z to 2026-09-10T00:29:39.283Z Record version: sha256:39e79f2b3d4ce9476b72afbf036a22d5ed3e93a7529c7004bba8e8b89011232f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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](https://asc.understandingaccounting.org/asc/460/10/#460-10-30-5). ##### [460-10-25-3](https://asc.understandingaccounting.org/asc/460/10/#460-10-25-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:29:39.283Z to 2026-09-10T00:29:39.283Z Record version: sha256:e53f6d4d1dec13b0c5efd9003fdb886ad24fd98fe81dbfb379de06732a637209 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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](https://asc.understandingaccounting.org/glossary/p/#probable "The future event or events are likely to occur.") 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. ##### [460-10-25-4](https://asc.understandingaccounting.org/asc/460/10/#460-10-25-4) Pending content: no Source downloaded (UTC): 2026-09-10T00:29:39.283Z to 2026-09-10T00:29:39.283Z Record version: sha256:d97a45553591887c209b47c681d05553c5d13d5a26468264f867b4d931a5a822 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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](https://asc.understandingaccounting.org/asc/460/10/#460-10-55-23) for implementation guidance. ### Product Warranties #### Warranty Obligations Incurred in Connection with the Sale of Goods or Services ##### [460-10-25-5](https://asc.understandingaccounting.org/asc/460/10/#460-10-25-5) Pending content: no Source downloaded (UTC): 2026-09-10T00:29:39.283Z to 2026-09-10T00:29:39.283Z Record version: sha256:82d623f5dca14e0f96437a87e0c40f496a83f4b10e2fe6fcc1fb77a8aab6dda0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Because of the uncertainty surrounding claims that may be made under warranties, [warranty](https://asc.understandingaccounting.org/glossary/w/#warranty "A guarantee for which the underlying is related to the performance (regarding function, not price) of nonfinancial assets that are owned by the guaranteed party. The obligation may be incurred in connection with the sale of goods or services; if so, it may require further performance by the seller after the sale has taken place.") obligations fall within the definition of a [contingency](https://asc.understandingaccounting.org/glossary/c/#contingency "An existing condition, situation, or set of circumstances involving uncertainty as to possible gain (gain contingency) or loss (loss contingency) to an entity that will ultimately be resolved when one or more future events occur or fail to occur."). Losses from warranty obligations shall be accrued when the conditions in paragraph [450-20-25-2](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-2) are met. ##### [460-10-25-6](https://asc.understandingaccounting.org/asc/460/10/#460-10-25-6) Pending content: no Source downloaded (UTC): 2026-09-10T00:29:39.283Z to 2026-09-10T00:29:39.283Z Record version: sha256:14e364f5a261419b0dde146c9f3b5b8994e264e7e9089bc88d42e82101044748 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The condition in paragraph [450-20-25-2(a)](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-2) is met at the date of an entity's financial statements if, based on available information, it is [probable](https://asc.understandingaccounting.org/glossary/p/#probable "The future event or events are likely to occur.") 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)](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-2) 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. ##### [460-10-25-7](https://asc.understandingaccounting.org/asc/460/10/#460-10-25-7) Pending content: no Source downloaded (UTC): 2026-09-10T00:29:39.283Z to 2026-09-10T00:29:39.283Z Record version: sha256:0681853770b0e3718f7e030193a6b1c3464bb74208e7f706d06d8ca5f930fa95 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The conditions in paragraph [450-20-25-2](https://asc.understandingaccounting.org/asc/450/20/#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. #### Separately Priced Extended Warranty or Product Maintenance Contracts ##### [460-10-25-8](https://asc.understandingaccounting.org/asc/460/10/#460-10-25-8) Pending content: no Source downloaded (UTC): 2026-09-10T00:29:39.283Z to 2026-09-10T00:29:39.283Z Record version: sha256:77f509fc69f38d8399271b8dd191f578f8a1119ad7ffb981588d79c731f65767 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Topic 606 on [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.") from [contracts](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") with [customers](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration."), and specifically the guidance on warranties in paragraphs [606-10-55-30 through 55-35](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-30) , 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. ##### [460-10-25-8A](https://asc.understandingaccounting.org/asc/460/10/#460-10-25-8A) Pending content: no Source downloaded (UTC): 2026-09-10T00:29:39.283Z to 2026-09-10T00:29:39.283Z Record version: sha256:09016df9af1caa0644d12fb5223503a69f624816d60abb570ca023abdc18785f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [605-20-25-6](https://asc.understandingaccounting.org/asc/605/20/#605-20-25-6) provides guidance on recognizing a loss on separately priced extended warranty and product maintenance contracts.