Discussion of “Accounting standards and debt covenants: Has the “Balance Sheet Approach” led to a decline in the use of balance sheet covenants?”

► Demerjian argues that standard-setters have moved towards a “balance sheet approach.” ► He provides evidence of a decline in the use of balance sheet covenants in debt contracts. ► The evolution of standard-setting is more complex than this argument implies. ► There are still open issues regarding the economic determinants of debt contracts.