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Asset and liability management (often abbreviated ALM) is the term covering tools and techniques used by a bank or other corporate to minimise exposure to market risk and liquidity risk through holding the optimum combination of assets and liabilities. [1]
In financial accounting, a balance sheet (also known as statement of financial position or statement of financial condition) is a summary of the financial balances of an individual or organization, whether it be a sole proprietorship, a business partnership, a corporation, private limited company or other organization such as government or not-for-profit entity.
Net asset value (NAV) is the value of an entity's assets minus the value of its liabilities, often in relation to open-end, mutual funds, hedge funds, and venture capital funds. [ 1 ] [ 2 ] Shares of such funds registered with the U.S. Securities and Exchange Commission are usually bought and redeemed at their net asset value. [ 3 ]
The net asset value formula is calculated by adding up what a fund owns and subtracting what it owes. For example, if a fund holds investments valued at $100 million and has liabilities of $10 ...
For instance, an asset that matures and pays $1 in one year is worth less than $1 today. The size of the discount is based on an opportunity cost of capital and it is expressed as a percentage or discount rate. In finance theory, the amount of the opportunity cost is based on a relation between the risk and return of some sort of investment.
IFRS 9 began as a joint project between IASB and the Financial Accounting Standards Board (FASB), which promulgates accounting standards in the United States. The boards published a joint discussion paper in March 2008 proposing an eventual goal of reporting all financial instruments at fair value, with all changes in fair value reported in net income (FASB) or profit and loss (IASB). [1]
In the United Kingdom, the term net asset value may refer to book value. A mutual fund is an entity which primarily owns financial assets or capital assets such as bonds, stocks and commercial paper. The net asset value of a mutual fund is the market value of assets owned by the fund minus the fund's liabilities. [11]
The formal accounting distinction between on- and off-balance-sheet items can be quite detailed and will depend to some degree on management judgments, but in general terms, an item should appear on the company's balance sheet if it is an asset or liability that the company owns or is legally responsible for; uncertain assets or liabilities ...