Because covenant compliance can be jeopardized by mandated changes in accounting principles,many loan agreements have financial covenants that rely on the accounting rules in place when the loan is first granted.

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Ja Nay Green · Accepted Answer

Final Answer : True, Explanation :  This is because changes in accounting principles can affect the financial ratios used to measure compliance with loan covenants, and using the original accounting rules provides a consistent basis for measuring covenant compliance over time.

Because covenant compliance can be jeopardized by mandated changes in accounting principles,many loan agreements have financial covenants that rely on the accounting rules in place when the loan is first granted.

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