LeaseCrunch, which makes software for CPA firms, recently released data compiled from surveying 77 United States based CPA firms on the new reporting standards that effect banks in terms of bank loan covenants.
The question surrounds new lease standards. The survey found that 69% of the auditors said that their clients have raised the issue of potentially violating bank loan covenants when the new lease standard impacts their reporting. Additionally, 59% of the CPA auditors think that recognition of a lease obligation will adversely affect loan covenants for clients.
The question is will banks hold clients to the original loan covenant terms and require a new loan be renegotiated as a result of a different and less impressive balance sheet. Also, will banks charge their clients new loan fees and use the original loan rate, or the current higher interest rates that have risen dramatically since the first agreement?
In many ways, banks are in the driver’s seat when it comes to the new structure. However, anxious clients in an uncertain market might complicate the matter and banks need to be ready to work closely with their clients to work through the changes.
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