imported>Doug Williamson |
imported>Doug Williamson |
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| (LC or sometimes LOC).
| | ''Financial reporting - balance sheet - liabilities.'' |
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| A promise document issued by a bank or another issuer to a third party to make a payment on behalf of a customer in accordance with specified conditions.
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| Letters of credit are frequently used in international trade to make funds available in a foreign location.
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| ==== Letter of credit contrasted with documentary collection ====
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| Letters of credit are often contrasted, from the perspective of a seller, with an alternative structure of [[documentary collection]]s.
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| A letter of credit is a ''direct'' obligation of a bank to pay (against specified documents).
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| A documentary collection means a bank ''collecting'' payment from the buyer (by presenting documents to the buyer).
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| A letter of credit therefore gives superior protection to the seller against credit risk or delayed cash flow, or both.
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| For this reason letters of credit are more expensive to arrange.
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| | Amounts which are due to be paid by a reporting entity. |
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| == See also == | | == See also == |
| * [[Advising bank]] | | * [[AP]] |
| * [[Bank payment obligation]] | | * [[Balance sheet]] |
| * [[Clean letter of credit]] | | * [[Creditors]] |
| * [[Commercial risk]] | | * [[Liabilities]] |
| * [[Condition]] | | * [[Payables finance]] |
| * [[Confirmed letter of credit]]
| | * [[Receivables]] |
| * [[Confirming bank]]
| | * [[Trade payables]] |
| * [[Credit]]
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| * [[Documentary collection]]
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| * [[Documentary credit]]
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| * [[Irrevocable letter of credit]] | |
| * [[Issuing bank]]
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| * [[LOC backed]]
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| * [[Standby letter of credit]]
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| * [[Trade finance]] | |
| * [[Uniform Customs and Practice for Documentary Credits]]
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| ===Other links===
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| [http://www.treasurers.org/node/5279 Letters of credit and supply chain finance, Will Spinney, ACT 2009]
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| [[Category:Manage_risks]] | | [[Category:Accounting,_tax_and_regulation]] |
| [[Category:Risk_frameworks]]
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| [[Category:Trade_finance]]
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