Provisions, Contingent Liabilities and Contingent Assets (NZ IAS 37)

Tom Goodly Ltd guarantees the bank overdraft of Pete Smith Ltd during 2018. Tom Goodly Ltds reporting period ends on 30 June each year. At the time of providing the guarantee, Pete Smith Ltd was in a sound financial position. During late 2019, due to the outbreak of the COVID-19 pandemic, international trading conditions deteriorated to such an extent that Pete Smith Ltd incurred substantial losses. Finally, on 25 July 2020, Pete Smith Ltd was forced to file for protection from its creditors.

Required:

Explain how Tom Goodly Ltd would report the guarantee provided to Pete Smith Ltd in its financial statements ending

i) 30 June 2019 ii) 30 June 2020