Depository Institutions: Divergent Loan Loss Methods Undermine Usefulness Of Financial Reports

Synopsis

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 establi