Entity a Has Provided a Bank Guarantee to a Bank

question 30

Multiple Choice

Entity A has provided a bank guarantee to a bank in relation to a loan provided to entity B. Entity B is solvent and shows no signs of defaulting on the loan. The treatment of the bank guarantee in the records of entity A is to:

• A) recognise a liability
• B) recognise a provision
• C) recognise a contingent liability
• D) do nothing

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Definitions:

Litigation Crisis

A crisis driven by a lawsuit (or the threat of one) that plays out in the court of public opinion as well as in the legal system.

Organizational Crisis

A critical event or point of decision that poses a significant threat to a business or institution and requires immediate action to prevent or mitigate damage.

Negative Outcomes

Unfavorable results or consequences that arise from a particular action or decision, often contrary to the desired or expected effect.

Performance

The act of carrying out a task or function, commonly evaluated in terms of its efficiency, effectiveness, and quality.