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A Note on the Accounting Model for Problem Real Estate Loans

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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.

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  • William C. Handorf & J. Minor Sachlis, 1990. "A Note on the Accounting Model for Problem Real Estate Loans," Journal of Real Estate Research, American Real Estate Society, vol. 5(3), pages 381-392.
    • Handle: RePEc:jre:issued:v:5:n:3:1990:p:381-392
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    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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