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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AAA Exams › Letters of comfort or support
Sir can a letter of comfort /support a subsidiary may get from a parent or a one company gets from another can that be a contingent asset or contingent liability for each party respectively?
It’s not an asset of any kind
As for the giver, it’s either a contingent liability or it’s a provision – that depends on the probability that that support may be called upon
Of course, you could argue that, since there is no contractual force behind such a letter which is, at best, a statement of intent, then it’s not even a contingent liability (a possible obligation the outcome of which will only be determined by the occurrence or non-occurrence of some substantially uncertain future event)