What Is a Comfort Letter?

A comfort letter is a business document that is intended to assure the recipient that a financial 𒊎or contractual obligation with another party ca🉐n and will be met. The sender is often an independent auditor or accountant.

The comfort letter does not make a leg𝕴ally enforceable commitment but conveys the ability of the other party to fulfill the terms of the agreem🐼ent under discussion.

A comfort🎃 letter is also 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 co꧋mpany is attesting to the legitimacy of the party that the recipient is considering doܫing 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官方开奖结果体彩网:prospectus to be filed with an investment offering. The letter is written after an audit and assures potential investors and other recipients of the prospectus that it does not contain false or misleading information and that any revisions to it will not materiall♓y 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官方开奖结果体彩网:does not guarantee anything, but it suggests that the borrower is financially so🐻꧂und.

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 subᩚᩚᩚᩚᩚᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ𒀱ᩚᩚᩚsidiary or to a supplier considering doing business with the subsidiary. In both cases, the letter assures the recipient that the subsidiary is a sound and viable business.

No Promises

Letters of comfort are routinely used as a part of doing buꦺsiness in many countries. They are rarely considered legally binding documentsꦑ.

Most letters of comfort are written in relatively vague language and include disclaimers to t🥀he effect that the write﷽r is merely stating an opinion, not undertaking an obligation.