Author: William C. Handorf and J. Minor Sachlis

Start Page: 381
End Page: 392
Volume: 5
Issue Number: 3
Year: 1990
Publication: Journal of Real Estate Research

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.