LMA and ACT Warn of IFRS's Impact on Loan Documentation

The Loan Market Association (LMA) and The UK’s Association of Corporate Treasurers (ACT) have issued a joint statement to their members highlighting the possible impact on existing loan documentation arising as a result of the adoption of International Financial Reporting Standards (IFRS) within the European Union. As of January 2005, the consolidated financial statements for most publicly traded companies governed by the law of an EU member state must conform to IFRS, and the associations recommend that both borrowers and lenders examine the formulation of existing financial covenants and other clauses in facility agreements which rely on calculations derived from the obligor’s financial statements, and address the need for possible changes.

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