A Note on the Accounting Model for Problem Real Estate Loans

A Note on the Accounting Model for Problem Real Estate Loans

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 mo...

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Veröffentlicht in:The Journal of real estate research 1990-10, Vol.5 (3), p.381-391
Hauptverfasser: Handorf, William C., Sachlis, J. Minor
Format: Artikel
Sprache:eng
Schlagworte:
Capital costs
Capital structure
Cost of equity
Generally accepted accounting principles
Investment risk
Loan payments
Loan rates
Loans
Real estate economics
Real estate financing
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Zusammenfassung: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.
ISSN:0896-5803
2691-1175
DOI:10.1080/10835547.1990.12090631