This excerpt taken from the ICI 6-K filed Mar 21, 2007.
(i) Guarantors Accounting and Disclosure Requirements for Guarantees
FIN No. 45 Guarantors Accounting and Disclosure Requirements for Guarantees, including Indirect Guarantees of Indebtedness of Others addresses the disclosure to be made by a guarantor in its financial statements about its obligations under guarantees. FIN No. 45 also requires the guarantor to recognize a liability for the non-contingent component of the guarantee, that is the obligation to stand ready to perform in the event that specified triggering events or conditions occur. The initial measurement of this liability is the fair value of the guarantee at inception. The Group adopted the disclosure requirements of FIN No. 45 in 2002 and no guarantees have been entered into or modified after 31 December 2002 that would require recognition of a liability under FIN No. 45.
Note 33 to the Group Annual Report and Accounts for 2006 discloses the nature and circumstances of the material guarantees together with their present value. The maximum potential amount of future undiscounted payments under all ICIs guarantees as defined by FIN No. 45, including those disclosed in note 33, with terms ranging between 1 to 12 years, amounted to £261m at 31 December 2006 (2005 £486m). After taking into account various mitigating and recourse factors, mainly the ability to procure products from other sources and to onward sell the various products and services, the maximum potential amount of future undiscounted payments is reduced to £69m (2005 £162m).