tailieunhanh - Accountants’ Handbook Special Industries and Special Topics 10th Edition_4

Tham khảo tài liệu 'accountants’ handbook special industries and special topics 10th edition_4', tài chính - ngân hàng, kế toán - kiểm toán phục vụ nhu cầu học tập, nghiên cứu và làm việc hiệu quả | BANKS AND SAVINGS INSTITUTIONS 29 23 In addition to all of the customary considerations surrounding credit risk sovereign risk lending involves economic social and political considerations that bear on the ability of the borrower to repay foreign currency obligations. Trade Finance Letters of Credit. Letters of credit are instruments used to facilitate trade most commonly international trade by substituting an institution s credit for that of a commercial importing company. A letter of credit provides assurance to a seller that he will be paid for goods shipped. At the same time it provides assurance to the buyer that payment will not be made until conditions specified in the sales contract have been met. Letter of credit transactions can vary in any number of ways. The issuing and advising institutions may deal with each other through their own local correspondent banks. Some of the documents may flow in different patterns. The requirements for payment and security will certainly vary from transaction to transaction. One of the attractive features of letter of credit financing from the customer s point of view is its flexibility. Facilities can be tailored to individual transactions or groups of transactions. Bankers Acceptances. A bankers acceptance is like a letter of credit in that it provides a seller of goods with a guarantee of payment thus facilitating trade. The institution s customer is the buyer who having established an acceptance facility with the bank notifies the seller to draw up a bill of exchange. The bank accepts that bill by physically stamping accepted on its face and having an authorized bank officer sign it and in so doing commits itself to disburse funds on the bill s due date. A banker s acceptance represents both an asset and a liability to the accepting bank. The asset is a receivable from the bank s customer the buyer in the transaction. The liability is a payable to the holder of the acceptance. The bank s accounting for open .