Frozen GAAP and International Monetary Fund: Difference between pages

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''Loan documentation - financial covenants''.
(IMF).  


The financial model used to set initial [[financial covenant]] levels will be based on the accounting principles in use by the borrower at the time of negotiation, usually referred to as generally accepted accounting principles ('[[GAAP]]').  
An international organisation created by the Bretton Woods Agreement in 1944.  


However accounting standards change over time, and consequently financial covenant ratios can be affected.  
The IMF promotes international financial stability and monetary cooperation.




In general loan documentation is worded such that covenants are tested assuming GAAP at the date the loan was negotiated, as this gives both parties the greatest certainty.  
The responsibilities of the IMF include:
*Oversight of the international monetary system.
*Monitoring the economic and financial policies of its member countries, encouraging policies that foster economic stability.
*Providing loans to member countries experiencing actual or potential balance of payments problems.
*Designing economic policies to enable member countries to manage their financial affairs more effectively.


This is called 'frozen' GAAP, because the initially prevailing GAAP is frozen for the purposes of covenant testing.
 
== See also ==
==See also==
* [[Bretton Woods Conference]]
*[[Documentation]]
* [[Exchange rate]]
*[[Financial covenant]]
* [[Exchange Rate Mechanism]]
*[[GAAP]]
* [[Monetary]]
*[[IFRS 16]]

Revision as of 11:22, 7 August 2016

(IMF).

An international organisation created by the Bretton Woods Agreement in 1944.

The IMF promotes international financial stability and monetary cooperation.


The responsibilities of the IMF include:

  • Oversight of the international monetary system.
  • Monitoring the economic and financial policies of its member countries, encouraging policies that foster economic stability.
  • Providing loans to member countries experiencing actual or potential balance of payments problems.
  • Designing economic policies to enable member countries to manage their financial affairs more effectively.


See also

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