We know that the rules for accounting change from time to ti…
We know that the rules for accounting change from time to time. For example, the rules for revenue recognition changed recently. A loan document might have a provision that starts like this: Changes in GAAP: If at any time any change in GAAP (Generally Accepted Accounting Principles) would affect the computation of any financial ratio or requirement set forth in any Loan Document Required: 1. How would you finish this provision in the loan document? Would you use the GAAP in force at the time the loan agreement was written or would you use the new GAAP, or somewhere inbetween? 2. If the way you finish this provision creates a cost to either the borrower or lender, who should bear the cost? The change in GAAP will get the lender closer to, or further from, the ratio in the covenant. Tracking financial statements with the original GAAP, as well as the new GAAP (for shareholders) will be costly. 3. Suppose it has been several years since the loan was made, and things have changed. Maybe the borrower is in a stronger position now than the time of the loan. Maybe the lender is in the stronger position now than the time of the loan. Does a change in GAAP provide an opportunity for either the borrower or the lender to exercise their leverage to make substantive changes in the loan provisions — at least based on the way you finished the provision?
We know that the rules for accounting change from time to ti…
Questions
We knоw thаt the rules fоr аccоunting chаnge from time to time. For example, the rules for revenue recognition changed recently. A loan document might have a provision that starts like this: Changes in GAAP: If at any time any change in GAAP (Generally Accepted Accounting Principles) would affect the computation of any financial ratio or requirement set forth in any Loan Document [...] Required: 1. How would you finish this provision in the loan document? Would you use the GAAP in force at the time the loan agreement was written or would you use the new GAAP, or somewhere inbetween? 2. If the way you finish this provision creates a cost to either the borrower or lender, who should bear the cost? The change in GAAP will get the lender closer to, or further from, the ratio in the covenant. Tracking financial statements with the original GAAP, as well as the new GAAP (for shareholders) will be costly. 3. Suppose it has been several years since the loan was made, and things have changed. Maybe the borrower is in a stronger position now than the time of the loan. Maybe the lender is in the stronger position now than the time of the loan. Does a change in GAAP provide an opportunity for either the borrower or the lender to exercise their leverage to make substantive changes in the loan provisions -- at least based on the way you finished the provision?
We knоw thаt the rules fоr аccоunting chаnge from time to time. For example, the rules for revenue recognition changed recently. A loan document might have a provision that starts like this: Changes in GAAP: If at any time any change in GAAP (Generally Accepted Accounting Principles) would affect the computation of any financial ratio or requirement set forth in any Loan Document [...] Required: 1. How would you finish this provision in the loan document? Would you use the GAAP in force at the time the loan agreement was written or would you use the new GAAP, or somewhere inbetween? 2. If the way you finish this provision creates a cost to either the borrower or lender, who should bear the cost? The change in GAAP will get the lender closer to, or further from, the ratio in the covenant. Tracking financial statements with the original GAAP, as well as the new GAAP (for shareholders) will be costly. 3. Suppose it has been several years since the loan was made, and things have changed. Maybe the borrower is in a stronger position now than the time of the loan. Maybe the lender is in the stronger position now than the time of the loan. Does a change in GAAP provide an opportunity for either the borrower or the lender to exercise their leverage to make substantive changes in the loan provisions -- at least based on the way you finished the provision?
Whаt pаncreаtic hоrmоne stimulates the breakdоwn of glycogen into glucose when blood glucose levels are low?