This paper was prepared for the IMF’s Electronic Discussion Group on the Treatment of Nonperforming Loans in Macroeconomic Statistics. Due to the linkages between loan recognition and interest accrual, and between loan writeoffs and operating surplus, decisions that are reached regarding the treatment of these loans may have a significant impact on the calculation of major aggregates in the national and international economic accounts. In this paper, recommendations are made on a number of important questions, and these recommendations are briefly justified. In particular, the treatment of loan principal (that is, how should nonperforming loans – or loans more generally -- be valued?), loan interest (that is, should interest be accrued on nonperforming loans?), and operating surplus (how should output and profits be measured?) are separately discussed.
Prepared for the IMF's Electronic Discussion Group on the Treatment of Nonperforming Loans in Macroeconomic Statistics