Debt valuation methodologies for financial reporting
Debt valuation has long been a topic of debate among entities required to report fair value. Because of varied interpretations of accounting standards, methodologies for valuing debt have ranged from simply reporting the remaining principal balance to an application of complex algorithms. This wide variance in methodologies can result in inconsistent results and volatility not reflective of market conditions.
The following resources facilitate the appropriate application of valuation principles by providing a framework for measuring the fair value of debt that is rooted in a careful observation of relevant markets.
- Debt valuation applications and best practices—borrower's perspective
- Debt valuation—applications and best practices—lender's perspective [coming soon]
- Chatham Debt Management valuation best practices [coming soon]
Our featured insights
Request your Q1 2021 Average Market Credit Spreads report
The information presented in this report represents average credit spread conclusions segregated by property type and grouped by LTV for the quarter ending March 31, 2021. Please use this form to request your copy of the Q1 2021 Average Market Credit Spreads report from Chatham.
Volatility in the valuation of swapped floating-rate positions — a proposed solution
This paper demonstrates the shortcomings of the current market practice for valuing swapped floating-rate positions and proposes a solution that addresses why there should not be a meaningful valuation difference between fixed-rate loans and certain swapped floaters.
Valuation of properties under development
NCREIF’s Valuation Committee has provided guidance on a common question we hear from our clients: “When should I recognize entrepreneurial profit in the valuation of properties under development?”
Purchase price allocations in times of uncertainty
The purchase price allocation is a critical audit matter in accounting for a new acquisition. Amid a recession, the valuation of the land, building improvements, and leases in place of an asset requires abundant testing and reconciliation to ensure the conclusions reflect fair market value.
EPRA earnings and the requirement for debt valuation
Recent changes in the EPRA NAV measures have led many CRE borrowers to include a valuation on their debt portfolios. The following commentary summarises the changes, and how Chatham is assisting clients in this valuation and reporting process.
U.S. real estate market update—July 27, 2020
In reviewing what has transpired in the commercial real estate (CRE) lending markets over the past six months, we found it helpful to re-read our market commentary as it was written at the end of each of the last three quarters.
Financial risk management serving commercial real estate since 1991
Chatham Financial is the largest independent financial risk management advisory and technology firm. A leader in debt and derivative solutions, we provide access to in-depth knowledge, innovative tools, and an incomparable team to help mitigate risks associated with interest rate and FX exposures.