Springfield is a major city and the seat city of the Hampden County Massachusetts, foreclosure accounting is provided by the GAAP (generally accepted accounting principles) and GAAP usually demands assets facing foreclosures to be reported separated in your accounts records. A foreclosure occurs when debtor has been delinquent for several months. Upon foreclosure the lender assumes the ownership of the property in question and sells it to meet the expenses incurred during the sale and to recover what the debtor owed; therefore, the borrower must default over a given duration before the lender can foreclose on your case and the debtor will carry out the accounting of the foreclosure. To ensure the right value of your foreclosure the following three steps should guide you:
Ensure that the asset is in foreclosure by consulting with your lender, before foreclosure as we have seen earlier you must be delinquent over a period of time, in Springfield it can take 150 days if you respond to the 150 day right to cure or if you did not respond to it 90 days notice before foreclosure action of which you can prolong further through negotiations between you and your lender or your counselor and your lender.
Accounting treatment of the asset
Make posts about the transfer of the asset to the creditor, debit post to the accumulated depreciation of the accounts balance and debit to the foreclosed asset liability account of the balance owed, and a credit post of the foreclosed property at its cost. From there make a debit post if there is a loss on the foreclosed asset or credit post if it’s a gain arising from the difference between the asset’s carrying value or rather the asset’s cost less its accumulated depreciation and its fair value.
Disclosure of the foreclosure
You are to report a foreclosure transaction in the embodiment of your financial statements or in the notes providing additional information about your financial statements and for the resulting gain or loss accruing from the transfer of the asset it should be included in your income statement the former as an income or the latter as an expense. Where the transaction is considered as an unusual and irregular business event, you are required to disclose the gain or loss arising from your foreclosed asset in a separate section for extraordinary items in your income statement.