NEW ACCOUNTING proposals could inadvertently cause universities and charities to break their banking covenants.
PwC warns that the sectors, including housing associations, could be hit by changes to accounting standards for SMEs.
The changes will include stopping UK private businesses and not-for-profit organisations (public benefit entities (PBEs)) from adjusting their accounts to recognise assets that have risen in value.
Loan agreements could be broken as the deals usually include a covenant based on balance sheets showing the most up-to-date value of those assets, the firm warned.
A consultation draft of standards for PBEs is set to be released by the Accounting Standards Board.
Matthew Hodge, director at PwC said, "PwC welcomes the publication by the
ASB of the draft standard, which recognises the unique accounting
requirements of public benefit entities.
"However, there are clearly some key issues that these entities will have to face head-on if they want to keep honouring their banking agreements."
Hodge called on PBEs to clarify their situation with lenders.
You may also like
If budgeting is to have any value at all, it needs a radical overhaul. In today's dynamic marketplace, budgeting can no longer serve as a company's only management system; it must integrate with and support dedicated strategy management systems, process improvement systems, and the like. In this paper, Professor Peter Horvath and Dr Ralf Sauter present what's wrong with the current approach to budgeting and how to fix it.
In this white paper CCH provide checklists to help accountants and finance professionals both in practice and in business examine these issues and make plans. Also includes a case study of a large commercial organisation working through the first year of mandatory iXBRL filing.