Non-Accrual Accounting

Accounting treatment under which a lender generally stops recognizing interest income on a troubled loan when collection is doubtful under its stated policy. Read the lender’s policy because cash receipts and reversals can be treated differently.

Why this matters to income investors

Moving a loan to non-accrual can reduce reported income and indicate pressure on future dividend coverage. Compare non-accrual amounts at cost and fair value.

How to use non-accrual accounting in your research

Separate cash received from income recognized without current cash. Compare the trend with borrower payment quality and the company’s recurring earnings before relying on it to support dividends.

This material is general education and information, not individualized investment, tax, or legal advice.