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loan covenant

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AA Exams › loan covenant

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by Kim Smith.
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  • August 3, 2021 at 12:50 pm #630256
    Noah098
    Member
    • Topics: 935
    • Replies: 352
    • ☆☆☆☆☆

    “The loan has a minimum profit target covenant. If this is breached, the loan would be instantly repayable.
    There is a risk the liability is incorrectly ALLOCATED as a non?current liability rather than a current liability if the covenant is breached.
    If the company does not have sufficient cash flow to meet this loan repayment, then there could be going concern implications.
    There is a risk of inadequate disclosure of going concern issues.”

    maam its a trivial doubt, but is it wrong to use the word “Classify” instead of “allocate” ?

    August 3, 2021 at 1:00 pm #630257
    Kim Smith
    Keymaster
    • Topics: 100
    • Replies: 6797
    • ☆☆☆☆☆

    Looking at the descriptions of assertions on page 86 the corrected word for the avoidance of any doubt would be PRESENTED. I don’t think a student would be penalised for using any alternative as long as it is clear that it is the current/non-current distinction that is the issue.

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