Depository Institutions: The Divergent Loan, Loss Methods of Underminding Usefulness of Financial Reports

by Linda M. Calbom, Daniel R. Blair, Kenneth R. Rupar

Loans are reflected in the financial reports of depository institutions (DI) in the form of loan loss reserves. This report presents the results of a review of the methods used by federally insured DI to establish loss reserves for loans which are likely to be uncollectible. Neither authoritative accounting standards nor regulatory guidance provide sufficiently detailed direction to DI for establishment of loan loss reserves. As a result, DI used widely diverse methods that produced reserves which could not be meaningfully compared among such DI & may not reflect the true loss exposure in the DI loan portfolios. Charts & tables.

80 pages, Paperback

First published August 1, 1998