Para 10.14 — MSO

10.14 The prima facie adequacy of the amortisation arrangements should be examined in accordance with the general principles set out below:-

1) Amortisation arrangements for loans for unproductive purposes may be related to some extent to the period of maturity of the loan also to the chances of growth of the particular type of unproductive debt. It is, however, sounder and more prudent to relate the arrangements rather to the object of the borrowing than to the currency of the actual loan. The period ought to be comparatively short where the expenditure on the unproductive purpose should more properly be met from revenue, where the assets constructed from the loan are comparatively shortlived, or where the total of the borrowings for the unproductive purpose is likely to increase rapidly. Where a material asset is produced the amortisation period should never exceed the life of the asset.