A Note on the Accounting Model for Problem Real Estate Loans

William C. Handorf () and J. Minor Sachlis ()
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William C. Handorf: Finance and Real Estate George Washington University Washington, D.C. 20052, http://www.sbpm.gwu.edu/depts/fin/default.htm
J. Minor Sachlis: Finance and Real Estate George Washington University Washington, D.C. 20052, http://www.sbpm.gwu.edu/depts/fin/default.htm

Journal of Real Estate Research, 1990, vol. 5, issue 3, 381-392

Abstract: Real estate lenders are required to account for troubled real estate loans under guidance provided by generally accepted accounting principles (GAAP). GAAP prescribes that cash flows of a troubled loan be discounted at a rate substantially different than financial theory indicates. The accounting model can lead to poor economic decisions and may encourage creditors to restructure problem loans, rather than pursuing other legal remedies.

JEL-codes: L85 (search for similar items in EconPapers)
Date: 1990
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