Bank finance articles and tips

As a result of the financial crisis and in a bid to improve transparency, the International Accounting Standards Board ("IASB") recently issued new standards to improve guidance on Off Balance Sheet activities. If material, these may impact the analysis of company risk, lending and investment decisions.

The changes mean that whilst an entity may remain the same in name, its accounting composition could differ. Assets and liabilities that were previously off balance sheet may be brought on balance sheet whereas other interests that used to be consolidated may now only be shown as a net investment if they do not meet new criteria. Changed levels of debt would mean that covenant calculations and test levels may need to be reviewed and forecasts redrawn. Consequently, regular review of borrowers, clients and investments remains key.