USA Loan payable and borrowings under US GAAP


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Hello - was hoping to get some help/some ideas from you all. I was tasked with calculating the NAV and P&L differences on loan payables between IFRS and GAAP. How can I calculate the fair value of the loan? Or is this something the client would provide me. I was given an interest payment schedule and that’s about it. There are some financing fees associated with the loan, but my understanding is that these will be netted against the loan payable balance and then amortized using the effective interest method. I have no clue what my difference would be as I believe this is a HTM loan and I thought under GAAP this would be treated at amortized cost. Appreciate any help and insight!
 

kirby

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I am concerned that this is being requested by someone who has no clue of what they are asking for. Reason: NAV stands for Net Asset Value so you need an asset figure less a liability figure to get an NAV. All you were given was the loan payable liability so why ask for an NAV when no asset is involved?

Given you have an interest payment schedule then you need to develop a full blown cash flow schedule. This means show all the future outflows of cash : interest AND principal. With that then you have to calculate a present value using an assumed interest rate. Use the current market rate for a loan with similar repayment term and risk characteristics. The calculated present value is your fair value of the loan.
 
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I am concerned that this is being requested by someone who has no clue of what they are asking for. Reason: NAV stands for Net Asset Value so you need an asset figure less a liability figure to get an NAV. All you were given was the loan payable liability so why ask for an NAV when no asset is involved?

Given you have an interest payment schedule then you need to develop a full blown cash flow schedule. This means show all the future outflows of cash : interest AND principal. With that then you have to calculate a present value using an assumed interest rate. Use the current market rate for a loan with similar repayment term and risk characteristics. The calculated present value is your fair value of the loan.
Thanks for your response.. I am working off last year’s workpapers which are showing an adjustment in both NAV and P&L between IFRS and GAAP, but show no workings. The interest repayment schedule shows the principal repayments as well. I am trying to gain an understanding of what the differences are between IFRS and GAAP that would result in the adjustment. All agreements are also in Japanese so I am working with limited information. I am not asking for a NAV but rather what would cause a difference in NAV between IFRS and GAAP based off how this loan payable is calculated between the two standards.
 
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