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Question
Two companies, Company A and Company B, issue convertible bonds at par. If Company A uses IFRS and Company B follow U.S. GAAP, the amount Company A records for interest expense will be greater than the amount Company B records for interest expense.
Answer
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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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C. both lenders and borrowers.
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