MFRS

Classification of loans with covenants as current or non-current

This issue provides guidance on on the current or non-current classification of loans payable that are subject to borrowing covenants. 

Loan agreements often include covenants that, if breached by the borrower, permit the lender to demand repayment before the loan’s normal maturity date. Such covenants may, for example, require the borrower to maintain one or more key financial ratios (such as interest cover or a debt to equity ratio) above or below a stated benchmark level.

This Hot Topic provides guidance on the current or non-current classification of loans payable that are subject to borrowing covenants.