What Is a Comfort Letter?

A comfort letter is a busi✅ness document that is intended to assure the recipient that a financial or contractual obligation with another party can and will be met. Th🦩e sender is often an independent auditor or accountant.

The comfort letter does not make a legally enforceable commitment but conveys the ability of the other paꦺrty t𓄧o fulfill the terms of the agreement under discussion.

A comfort letter is al🧸so known as a letter of intent or, in some cases, a solvency opinion.

Understanding the Comfort Letter

A comfort letter serves a purpose that is similar❀ to that of a 🅘letter of reference or a letter of introduction. That is, a respectable individual or company is attesting to the legitimacy of the party that the recipient is considering doing business with.

The letter doesn't go much farther than that, but it is often attached to more detailed information about the agreement or contract that is under consideration.

Examples of Comfort Letters

One common type of comfort letter is attached to copies of a 澳洲幸运5开奖号码历史查询:prospectus to be filed with an inve﷽stment offering. The letter is written after an audit and assures potential investors and other recipients of the p🐎rospectus that it does not contain false or misleading information and that any revisions to it will not materially change the offer.

A similar letter may be issued by an auditor to a lender indicating the auditor's opinion that the prospective borrower is able to repay the loan. The letter 澳洲幸运5开奖号码历史查询:does not guarantee anything, but it suggests that the borrowe෴r is financially sound.

Accountants' Letters

Comfort letters also may be issued by accounting firms to underwriters promising to carry out "reasonable investigation" into new offerings of securities. These letters commit the accounting firm to delivering a report that conforms to generally accepted accounting principles (GAAP).

Finally, another broad category of comfort letters may be sent by a parent company on behalf of a subsidiary. The parent company might send a letter to a local bank that is considering a loan to the subsiꦦdiary or to a supplier considering doing business with the subsidiary. In both cases, the letter assures the recipie🎃nt that the subsidiary is a sound and viable business.

No Promises

Letters of comfort are routinely used as a part of doing business in many countries.ಌ 🍬They are rarely considered legally binding documents.

Most letters of comfort are written in rel🐻atively vague language and include disclaimers to the ef💎fect that the writer is merely stating an opinion, not undertaking an obligation.