Control covenants, waivers, and later evidence

Cedar Trail misses a December 31 ratio covenant on a $900,000 note. The lender signs a letter in February. The draft workpaper replaces “breach” with “waived.” That edit destroys the chronology.

Preserve the rights at each date

Capture the covenant formula, test date, actual result, grace period, lender rights, cure, notice, waiver date, waiver duration and scope, next measurement dates, expected future compliance, and issuance date. Classification is the output of that dated file, not of one adjective.

The canonical calculation supplies $900,000 as callable current exposure and no qualifying classification relief. That is a stipulated result for arithmetic practice, not a conclusion learners should export to another agreement.

Subjective clauses require current-guidance research

A subjective acceleration clause uses a condition not objectively determinable, such as a material adverse change. Under current guidance, probability and disclosure can matter even before demand. In June 2026, FASB reported tentative support for a trigger-based model and expanded default disclosures. Tentative does not mean effective.

Later evidence can confirm or create

A February waiver relates to a December breach but has its own classification requirements. A January operating collapse may provide evidence about year-end conditions or may be a new condition. Identify the specialized Topic and do not apply a generic “Type I/Type II” label before the facts.

Exit check

Redline a covenant workpaper so no date or lender right is overwritten. Add a separate yellow standards-clock box naming current Topic 470, the 2026 project, and the rule that tentative decisions do not change the close.