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Monthly Archives: December 2011

Why Guaranteed Payments are not Guaranteed

Lenders and underwriters in my training workshops on Cashflow Analysis of Tax Returns often stumble a bit on that word ‘guaranteed’. After all, we all know what that means, right?

Well, it is dangerous to assume that words on tax returns or in financial statements mean the same thing the do in common usage. Read on and at the bottom of this post I’ll tell you what ‘guaranteed’ means in IRSSpeak.

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ALLL and TDRs: How to decide if a loan is a TDR

One of the ways the Allowance for Loan and Lease Losses (ALLL) is impacted occurs when a financial institution grants a concession through modification of the terms of a loan due to the financial difficulty of the borrower. This is called a Troubled Debt Restructure (TDR).

Understanding whether a particular concession is material enough to qualify the loan as a TDR, or whether the cause of the concession is truly the financial difficulty of the borrower, is critical in determining the appropriate balance for the Allowance for Loan and Lease Losses.

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