CFOs Brace For Loan Disruption Amid Accounting Changes

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Corporates are gearing up to manage a whole slew of accounting standards changes in the coming years, but one of the more immediate effects involves how leases are recorded on financial statements.

Reports in the Wall Street Journal said the changes could “upend” loan agreements, and have chief financial officers scrambling to adjust their strategies.

As the publication reported Thursday (October 11), public companies will be required to report their operating leases as liabilities, which will significantly change their corporate debt-to-earnings ratios. It’s a key metric for lenders when establishing loan covenants to mitigate default risk, and could limit borrowing powers even for a company whose financials have not changed, .

The changes take effect next year.


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