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The UK regulator the Financial Reporting Council (FRC), along with a number of other US and European accounting standards setters, has launched a public survey to assess the impact of proposed new IFRS leasing standards on financial covenants in loan agreements.

The International Accounting Standards Board (IASB) has completed its redeliberations in regard to the proposed new standard on leases which is now expected to be issued before the end of 2015. It will require lessees to recognise assets and liabilities for all identified leases.

As a result, the amount of newly recognised lease liabilities is expected to be significant for many entities. The standards bodies say this has raised questions about the possible impact of the new IFRS on financial covenants in loan agreements that refer to measures of debt, net financial position or similar indicators.

The aim of the public survey to acquire quantitative and qualitative information about how covenants are determined in Europe.

The first objective is to assess the possible impact of the new IFRS on leases on lenders’ business practices. Financial institutions who participate in the survey will have the opportunity to increase their awareness of the effects of the new IFRS on financial covenants applied to their customers’ loan agreements, possibly resulting in reducing the cost of implementing the new IFRS for them and their customers.

The second objective is to better understand the extent to which covenants are based on figures reported in accordance with IFRS.

The survey is being organised by the FRC in the UK, along with the European Financial Reporting Group (EFRAG), IASB, and the national standard setters of France, Germany, Italy and Lithuania.

UK companies and individuals who want to take part are requested to answer the survey questions and submit their replies by 30 September 2015 to Annette Davis at

A feedback statement will be issued so as to share the results of the public survey, whilst the individual responses will remain confidential.

The survey can be accessed here: