Frank Scott Musical Arrangements, 1970s-1990s

Collection of 273 music arrangements by Frank Scott for use by his orchestra in California until his death

Estimating the efficiency gains of debt restructuring

One rationale for debt reduction operations under the Brady Plan has been, by alleviating the debt overhang, to improve investment efficiency. Brady-type debt and debt-service reduction (within a strong policy framework, where there is a track record of economic adjustment) has been shown to affect development significantly. The principle benefit of eliminating the debt overhang is to improve investment incentives for private investors - direct liquidity relief is secondary. So, evaluating a debt and debt-service reduction operation should involve estimating efficiency gains as well as direct financial savings. The authors present a method (requiring only weak assumptions) for establishing an upper bound on the efficiency impact of debt reductions. The key reference framework for evaluating much more complex Brady-type debt deals is open-market buybacks. Their approach to determining this upper bound hinges on the assumption that efficiency gains on a straight open-market repurchase of debt never exceed the gains to creditors. If an open-market buyback indeed reduces the debt overhang and moves a country toward more (and more efficient) investment, creditors will anticipate this in setting a price for remitting their claims. So, at least part of the efficiency gains are dissipated in additional capital gains to creditors. To give point estimates to efficiency gains, they develop a simple two-period model of debt overhang and investment and discuss assumptions under which it is possible to obtain a closed-form solution to the model. Their empirical estimates indicate that the general bounds derived in the first step tend to overstate substantially the efficiency gains of debt reduction operations. In Mexico's case, for example, the upper-bound estimate of efficiency gains is US $15 billion, but the point estimate is only about US$1 billion. What are the policy implications of their low point estimates? The debt-overhang disincentive may not be as important as the broader problem of debtors'credit constraints in international capital markets. How can new loan packages to developing countries be structured to maximize investment incentives? By using loans rather than outright grants, donors can give a country more funds for current investment at lower present dicounted expense. But grants, unlike loans, do not distort investment incentives. In short, if a credit-constrained country starts with no debt overhang, the first tranche of aid should probably be in hard loans. As total transfers increase, if the borrowing country has not gained access to private capital markets, marginal transfers should be grants. The optimal strategy for new flows can involve both increasing grants and decreasing loans. When transfers are expected to be heavy, a case can be made for using grants exclusively.Strategic Debt Management,Economic Theory&Research,Financial Crisis Management&Restructuring,Banks&Banking Reform,Environmental Economics&Policies

Proposed statement of position : Identifying and accounting for real estate loans that qualify as real estate investments;Identifying and accounting for real estate loans that qualify as real estate investments; Exposure draft (American Institute of Certified Public Accountants), 1993, Oct. 27

This proposed statement of position (SOP) applies to all entities that make or acquire real estate loans. It provides guidance on identifying and accounting for real estate loans that qualify as real estate investments for financial reporting purposes. Such loans may include real estate acquisition, development, and construction (ADC) loans, loans on operating real estate, convertible mortgages, and shared appreciation (participating) mortgages. It requires real estate loans that do not meet certain criteria to be classified and accounted for as real estate investments. For purposes of applying this proposed SOP, a loan classified and accounted for as a real estate investment is considered the equivalent of an investment by the lender in a hypothetical partnership, the assets of which include the subject real estate. This proposed SOP does not apply to (1) troubled debt restructurings, foreclosures, or in-substance foreclosures relating to real estate loans accounted for as loans using the criteria set forth in this proposed SOP, (2) debtors, (3) real estate loans resulting from the lender\u27s sale of real estate, (4) permanent mortgage real estate loans on one-to four-family residential properties, or (5) small real estate loans evaluated for impairment by the lender in the aggregate. The proposed SOP supersedes the guidance in the February 10, 1986, AICPA Notice to Practitioners, ADC Arrangements (the third Notice), which was carried forward in the AICPA Accounting Standards Executive Committee (AcSEC) Practice Bulletin 1, Purpose and Scope of AcSEC Practice Bulletins and Procedures for Their Issuance. This proposed SOP should be applied to real estate loans entered into or purchased after December 31, 1994. Earlier application is encouraged. The following highlights significant differences between the provisions of the proposed SOP and the third Notice. The proposed SOP clarifies the scope by stating that it applies to all entities that make or acquire real estate loans. The proposed SOP incorporates the consensus reached in the Financial Accounting Standards Board (FASB) Emerging Issues Task Force (EITF) Issue No. 86-21, Application of the AICPA Notice to Practitioners Regarding Acquisition, Development, and Construction Arrangements to Acquisition of an Operating Property, that extends the concepts of the third Notice to operating properties. The third Notice applies to ADC arrangements in which the lender participates in expected residual profits from the underlying real estate project. The proposed SOP\u27s primary focus is on the assumption of risk. In this regard, while the presence of an expected residual sharing arrangement typically will coincide with classifying a loan as an investment in real estate, it is not a specific criterion for determining the classification. Both the third Notice and the proposed SOP refer to a borrower\u27s equity investment that is substantial to the project. Among other revisions, the proposed SOP clarifies that substantial should be evaluated in terms of the minimum initial investment tests described in FASB Statement of Financial Accounting Standards No. 66, Accounting for Sales of Real Estate. The proposed SOP, similar to the third Notice, provides that a loan initially classified as an investment may be reclassified as a loan if one or more of the loan characteristics in paragraph 12 of the proposed SOP are met. However, unlike the third Notice, the proposed SOP does not permit or require reclassification from loans to investments unless the underlying loans are renegotiated in other than a troubled debt restructuring.https://egrove.olemiss.edu/aicpa_sop/1590/thumbnail.jp