Classification of Mortgage Guarantee Contract as Financial Guarantee and Its Revenue Recognition

Blog|News|Account & Audit|
< 1 minute

By Taxmann
|
Last Updated on 19 June, 2024

A company issuing mortgage guarantees on housing loans primarily provides loss default guarantees to financial institutions. These guarantees are triggered when a borrower defaults and the loan becomes a Non-Performing Asset (NPA). The company then pays the Equated Monthly Instalment (EMI) until the loan is settled, reducing its obligation monthly.

Under Ind AS 109, these guarantees are classified as “Financial Guarantee Contracts” due to their debt obligation and default guarantee features.

This story discusses an EAC opinion to determine the correct classification and revenue recognition for these mortgage guarantees.

Click Here To Read The Full Story

Disclaimer: The content/information published on the website is only for general information of the user and shall not be construed as legal advice. While the Taxmann has exercised reasonable efforts to ensure the veracity of information/content published, Taxmann shall be under no liability in any manner whatsoever for incorrect information, if any.