Accounting for bank guarantees in accounting: features of reflection

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

In today's economic conditions, a bank guarantee remains one of the most popular services of financial institutions. It is used as a tool to insure the risks that may occur if the counterparty refuses to fulfill its obligations. In practice, there are often difficulties with the tax and accounting accounting of bank guarantees. In the article we will deal with the nuances of reflecting information.

General information

A bank guarantee agreement can be concluded by an insurance (credit) organization for any required amount and for almost any period, not only with a legal entity, but also with an individual entrepreneur. As established in paragraph 1 of Art. 369 of the Tax Code, it ensures the fulfillment by the principal of the obligation to the beneficiary. Simply put, a bank guarantee is a guarantee tocreditor. The bank guarantees that the company applying for the guarantee will fulfill its obligation.

Financial organization, in accordance with the provisions of Art. 368 NC, acting as a guarantor, issues, at the request of the principal (client), a written obligation to pay the beneficiary (creditor) the amount of money specified in the contract if the latter submits the corresponding written request.

As established by paragraph 2 of Art. 369 of the Tax Code, the principal undertakes to pay remuneration to the guarantor.

In some cases, the guarantee of a financial institution is mandatory:

• for government contracts;
• when executing government orders;
• to participate in auctions, competitions, tenders, etc.

issuance of guarantees is included in the number of banking operations on the basis of paragraph 8 of part 1 of Art. 5 FZ No. 395-1.

VAT

Based on the provisions of sub. 3 p. 3 art. 149 TC, transactions are not subject to VAT on:

• issuance and cancellation of warranty;
• confirmation and modification of its terms;
• making a guarantee payment;
• registration and verification of documents.

Consequently, VAT on the amount of the commission (remuneration) is not presented to the principal by the guarantor bank.

The issue of guarantees provided by insurance companies is solved differently. In this case, the remuneration is subject to VAT. The "incoming" tax from the commission to the guarantor is en titled to be deducted by the principal upon fulfillment of the conditions stipulated in paragraph 1 of Art. 172 NK.

How is a bank guarantee reflected in the accounting of the principal?

The first financial transaction is the payment of the amount of remuneration to the guarantor. To show the commission for a bank guarantee, the following entries are made in accounting:

• Dt 76 Ct 51 - payment of a commission to a financial institution.
• Dt 91 Cr 76 – consideration expensed.

Reflection of a bank guarantee in accounting is carried out in accordance with its intended purpose. In most cases, it ensures the repayment of the principal's debt arising from the acquisition of any assets (fixed assets, for example).

In this situation, when accounting for a bank guarantee in accounting, the principal draws up an entry reflecting the purchase of the object for which it is provided, and at the same time the inclusion of remuneration in the cost:

Dt 08 (01, 10, 41, 07 etc.) Ct 76.

The receipt of an object is reflected in the entry:

Dt 08 (10, 41, etc.) Ct 60 - in an amount equal to the cost.

Account 01 is debited when credited to the balance. The initial amount reflects the cost of the object and the amount of the commission.

If the principal himself does not settle accounts with the beneficiary, the bank does it for him and issues a claim for reimbursement of expenses. To reflect the acceptance of this requirement, a transaction is made:

Dt 60 ct 76.

Repayment of debt to the bank is reflected in the entry:

Dt 76 Ct 51.

How to reflect a bank guarantee in accountingbeneficiary?

The creditor, as a rule, is neither authorized nor obligated participant in legal relations with the principal. The fact is that the settlements that can be carried out between them are regulated by a separate agreement. At the same time, the creditor acts as a beneficiary under an independent guarantee, since the bank has an obligation to him until the end of all settlements. These features make it necessary to partially apply off-balance sheet accounting. How to account for bank guarantees on off-balance sheet accounts? Let's figure it out.

If the guarantee is applied, the following entries are made:

• Dt sch. 008 - the amount is reflected in the amount of the principal's obligation secured by the bank (upon receipt of an independent guarantee, the original of which is provided to the beneficiary);
• Dt sch. 62 Kt. 90 - the amount of the principal's debt is shown;
• Dt sch. 90 Kt. 41 - write-off from the balance of the asset transferred to the principal.

If the client does not pay for the delivery of the asset, a bank guarantee is applied. In accounting, the amount received is reflected as follows:

• Dt sch. 76 ct sc. 62 - the obligation to pay in favor of the beneficiary is transferred to the bank;
• Dt sch. 51 ct sc. 76 - receipt of payment from the bank;
• CT cf. 008 Warranty ended.

How to reflect information in case of warranty cancellation?

Consider the situation when the bank guaranteeorganization is not applied in practice, that is, it is written off. In this case, the transactions will be made by the beneficiary:

• Dt sch. 62 Kt. 90 - income from the sale of products (in an amount equal to the selling price);
• Dt sch. 90 Kt. 41 - reflects the cost of goods sold;
• Dt sch. 008 - getting a guarantee;
• Dt sch. 51 ct sc. 62 - receipt of payment from the principal (in the amount of the selling price of products);
• CT cf. 008 - cancellation of the guarantee, in connection with the fulfillment by the principal of his obligations under the contract.

With the accounting of the bank guarantee for the principal and the beneficiary, everything is more or less clear. What records will the guarantor himself form? More on that below.

Bank transactions

There are a number of features that need to be taken into account when accounting for bank guarantees. Accounting provides for special accounts (approved by the regulation of the Central Bank No. 579-P of 2017). The following transactions are considered the most typical:

• Dt sch. 99998 ct sc. 91315 - issuance of a guarantee by a bank (in the amount of the secured obligation);
• Dt sch. 47423 ct sc. 70601 - receiving remuneration from the principal (in the amount of commission);
• Dt sch. 70606 ct sc. 47425 - reserves have been created to pay the beneficiary in case of need (in the amount of the secured obligation).

Nuances

If security in the form of a deposit is used as a condition for providing a guarantee, when accounting for a bank guarantee in accounting, the corresponding account of the principal is debited and the passive account is credited,summarizing data on receipts from customers (for example, 43001).

When writing off a guarantee due to legislation, a posting is generated:

Dt sch. 91315 ct sc. 99998.

At the same time, the size of the reserve decreases:

Dt sch. 47425 ct sc. 70601.

If the principal does not repay the debt to the beneficiary, the financial institution does it for him. This is how a bank guarantee appears in accounting. Accounting is carried out by forming the following postings:

Dt sch. 60315 Beneficiary account ct;

Dt sch. 91315 ct sc. 99998 - withdrawal of payment.

Similarly, the reserve is reduced using the given correspondence of accounts. At the same time, a new reserve is created to cover possible losses in the amount of the upcoming recovery from the principal:

Dt sch. 70606 ct sc. 60324.

Extra

In addition to the above entries, when accounting for a bank guarantee in accounting, the following entries are formed:

• Dt 99998 Ct 91312 - compensation of expenses of a financial institution at the expense of a previously credited deposit.
• Dt 60324 Ct 70601 – reduction of the amount of the reserve due to partial reimbursement of the bank's expenses.
• Dt of the principal's account Kt 60315 - reimbursement of the balance of the bank's expenses by the principal.
• Dt 60324 Cr 70601 - decrease in the amount of the reserve.

Taxation nuances

Tax and accounting of a bank guarantee has significant differences. Above weWe have already mentioned that VAT is not charged on operations related to the use of bank collateral. Of course, this rule does not apply to the calculation of tax on goods supplied by the beneficiary, if this is established by law (under the OSNO, for example) or by agreement.

The beneficiary attributes the payment received to repay the obligation to income in the same way as if the payment of assets would be made without a bank guarantee, i.e. as proceeds from the sale.

Principal can choose where to include the costs that arise when interacting with a banking organization. At the same time, of course, he must take into account the characteristics of the secured asset and the content of the legal relationship with the beneficiary, established in essence. The principal may include costs in other or non-operating expenses.

Please note that regardless of the option chosen, costs must be recognized on a straight-line basis over the life of the guarantee. The corresponding provision is enshrined in a letter from the Ministry of Finance dated 11.01.2011.

Accounting for commission with even distribution of costs

With this approach, the following transactions are generated:

• Dt sch. 97 ct sc. 76 - inclusion of the guarantor's remuneration in the costs of the upcoming periods after the guarantee is issued;
• Dt sch. 76 ct sc. 51 - transfer of commission to the bank;
• Dt sch. 91.2 Kt c. 97 - writing off part of the remuneration by agreement or according to the schedule (calculated in proportion to the duration of the guarantee).

Important points

Please note that the order of deductioncommission to the bank - in equal parts or in one payment - is fixed in the accounting policy. The corresponding requirement follows from the provisions of PBU 1/2008.

The key criterion for choosing a uniform distribution of costs is the dynamics of revenues associated with the corresponding costs. If income is distributed over several reporting periods, then expenses should be shown in accounting synchronously.

When choosing an approach, one should be guided by the characteristics of assets. If the supply of materials and raw materials is carried out sequentially, then the even distribution of costs will be more justified.

Accounting by industry

It should be noted that very much when choosing an approach for recording expenses depends on the economic sector in which the principal operates. So, as a subtype of costs for the coming periods are the costs of future work, which may be recognized by construction companies. When applying the method of equal distribution of costs described above, postings are formed:

• Dt sch. 97 ct sc. 76 - accounting for commission as part of deferred costs;
• Dt sch. 20 Kt. 97 - part of the remuneration established by the contract or payment schedule is charged to the cost of the construction object.

When transferring the commission for a bank guarantee to expenses, debit entries may be different. It depends on the type of specific business transaction. For example, in postings, the account will be used. 23 if the asset is placed on an auxiliaryproduction.

Leasing relations

We should separately consider the situation when the principal at first clearly and under the contract paid for all the deliveries of the beneficiary, but then one day suddenly stopped doing this (while the guarantee continued to operate). Such cases are common when renting commercial real estate.

Payments when transferring an object for paid use, made on time, are reflected in the record Dt c. 26 Kt. 76 in accordance with the frequency of deductions (for example, once a month).

It is advisable to take into account the commission in tax accounting:

1. Until the moment of violation of the terms of the rent - by synchronously writing off the commission with payments (monthly, for example).
2. After the suspension of payments (and the application of the guarantee as a result) - by writing off the balance of the commission as an expense.

The accounting entry is the same as for the rent, and the commission is deducted as a lump sum immediately after the guarantee is applied.

Conclusion

Accounting for bank guarantees in budgetary institutions is carried out on off-balance accounts. This is due to the fact that the guarantee does not go to the account of the customer, but is with the credit institution during the entire period of execution of the state contract.

The operation is reflected as shown in the table below.

Operation	Account by balance	Amount
Receiveguarantees to secure obligations under the state contract	10	With "+" sign
Warranty cancellation	10	With "-" sign.

The basis for writing off is the fact that the contractor complied with the terms of the contract, breach of agreements or termination of the contract in the manner prescribed by law.

Please note: when securing in the form of collateral, implemented within the framework of the provisions of Art. 96 44-FZ, it is not allowed to reflect cash receipts on an off-balance sheet account. 10.