In the course of financial and economic activities, commercial organizations act as borrowers, lenders, issuers, and are exposed to various risks that may significantly affect their financial position and performance. One of the most effective tools to ensure protection of interests of the parties to credit agreements when making deals, implementing investment projects, issuing bank guarantees, financing investment projects, and carrying on international trade is covenants. Covenants reduce risks associated with the counterparty, its creditworthiness, and ability to dispatch quality product and provide proper transportation. According to clause 24 of RAS (PBU) 4/99 Financial Statements of Organizations, explanatory notes to the Balance Sheet and Income Statement should provide users with additional data, which are inappropriate for inclusion in these forms of reporting, but which the users need for reasonable assessment of financial position and performance of the organization and changes in its financial position. One of the most important aspects of financial reporting is information disclosure on fulfillment of covenants of transactions. The existing Russian accounting regulations do not include the concept of covenants; there are no rules for information disclosure about covenants in Russian financial statements either. Economic literature addresses covenants from the finance perspective. There are few studies on the content of covenants for accounting and reporting purposes. Therefore, there is a need to research the theoretical and methodological framework of generating information on covenants in financial statements prepared under International Financial Reporting Standards (IFRS). The aim of the study is to develop a theoretical and methodological framework for information disclosure about covenants in financial statements. On that basis, the article sets the following tasks: to determine the nature of covenants as objects of accounting; identify cases and purposes of embodying covenants in transaction agreements; and determine the rules for disclosure of information on covenants in financial statements. To solve these problems, the author applied scientific methods of research, including analysis, synthesis, observation, and logical grouping of data generalization. The main result of the study is the developed methodological approach to generating information about covenants in financial statements. The author concluded that the proposed option of information disclosure about covenants in financial statements would help make timely management decisions on risk minimization and adjustments to financial position and property status of the organization.
Keywords: covenants, obligations, financial reporting, information
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