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Fair Value

Banks determine fair value (the value they can reasonably place on loans) using a variety of factors. Those factors include but are not limited to the following:

  • Similar transactions for cash
  • Secondary market values of similar financial instruments
  • The credit standing of the debtor or guarantor
  • Prevailing interest rates
  • Available pricing options
  • Anticipated delays in receipt of payment
  • Tax consequences

References

Accounting for Loan Swaps (BC 200, May 1985)
Provides guidance in accounting for loan swaps, principally of foreign borrowers

See also Accounting