How do you treat a usance pay at sight lc agreement? Financing activity or AP?

Question

Company operating in the US under IFRS rules. Currently looking to convert some LC agreements into UPAS agreement (Usance Pay At Sight). Previously would account for this as a contingent liability -off b/s. But now since we are now using the line and deferring payment, would we now account for this as a operating activity or financing activity?

Answer 1

Until you actually make use of the letter of credit for the intended business transaction, it's an off balance sheet disclosure.