Question

How are Note Receivables valued?

Answer 1

The note receivables are the amount which the company expects to receive so it is an asset for the company. The valuation of note receivable can be done in two ways. One way is to create an allowance for that, bad debt allowance where most companies assess their debt as to what percentage of debt may turn into bad debts and create provisions for that. Some companies choose to assess their debt on individual basis and create provision, it is similar to as to what is the percentage you are expecting that debt will be a bad debt. The second way is to simply write off the amount from the note receivable and show the net amount as to how much is expected to receive. This is more a simpler approach to valuing your note receivable.