This was the topic of a joint Association of Corporate Treasurers/Loan Market Association Seminar in November 2004. The seminar followed a joint ACT/LMA statement on the issue.
Few companies are likely to have serious issues with financial covenants on first time adoption of International Financial Reporting Standards (IFRS), but all do need to check their own position. The position of any company will be peculiar to itself, its circumstances and its particular loan agreements.
This briefing note sets out certain matters to have in mind in considering how IFRS adoption affects financial covenants in a company’s loan agreements.