What are subjective acceleration clauses and how do they impact the classification of debt?
Subjective acceleration clauses
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What are subjective acceleration clauses and how do they impact the classification of debt?
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Subjective acceleration clauses are provisions in a debt agreement that allow the creditor to accelerate repayment under certain conditions that aren’t objectively determineable (i.e. material adverse change clauses, “experiencing financial difficulty” clauses, etc.). If the likelihood of acceleration is probable, then the debt should be classified as a current liability.