Although covenant compliance can be jeopardized by mandated changes in accounting principles,few loan agreements have financial covenants that rely on the accounting rules in place when the loan is first granted.

Question

Quizplus · Accepted Answer

Many loan agreements indeed have financial covenants that rely on the accounting rules in place at the time the loan is first granted, to ensure consistency in financial reporting and covenant compliance assessment over the life of the loan.

Although Covenant Compliance Can Be Jeopardized by Mandated Changes in Accounting