Abstract The article presents the response of the American Accounting Association on the Financial Accounting Standards Board's exposure draft on "Accounting by Creditors for Impairment of a Loan--Income Recognition." The Committee believes that the proposed disclosures about the creditor's policy for recognizing interest income, including how cash receipts are recorded, and the total amount of cash receipts, including how the total is allocated between principle and interest, would be useful to financial statement users. The Committee notes that there are differences between measuring loan revenue and expense using present value techniques and using changes in fair or market value. The Committee believes that SFAS 114, both for loans where impairment is recognized using present value techniques and market or fair value techniques, provides adequate guidance on income, revenue, and bad debt expense recognition.
Barth et al. (Wed,) studied this question.