Nortel Network Case

Nortel Networks Case

Angelia Renee Cady

Acc / 230

August 26, 2012

Darcie Sargent

Nortel Networks Case

Nortel has established agreements that are bindings under FIN 45. Which states that, "a guarantee is as binding as a contract, guaranteeing that Nortel will make payments based on charges related to assets, liability, an equity security of the guaranteed party or third party should they fail to perform under an agreed upon agreement" (Fraser, 2007). Nortel retained liabilities that relates to events which occurred prior to the sales of portions of its business. Nortel shows guarantees to the escrow of shares for prior periods which include indemnities that apply to specific time periods which do not provide a limit on the maximum potential amount of liabilities. It is difficult with these types of agreements to establish the maximum amount of liabilities since it generally depends on the outcome of future events which cannot be predetermined (Fraser, 2007).

Nortel enters into agreements with customers, suppliers, bankers and agents under credit facilities, third party debt, and lease agreements that include limited intellectual property obligations that are necessary in the industry. Their financial reports has never shown any significant payments or liabilities accrued under any of these agreements (Fraser, 2007).

Nortel has commitments that include bids, performance, and other bonds that are associated to contracts that generally term from less than a month to twelve months depending on the contract. There are commitments which include agreements with selected venture capital firms to increase capital. Purchase commitments with suppliers for a discounted