Quarterly NAV workpapers

Net Asset Value is calculated quarterly for the private equity fund & we fund accountants will prepare the NAV workpapers for the calculation of NAV per investor.

In private equity funds, NAV represents the value of an investor’s investment in the fund at any particular time. The values of all the holdings in a fund plus any other assets, such as cash, minus any unpaid expenses will represent the total NAV for the fund. It is common to see a private equity fund's net asset value, or NAV, referred to as its residual value, since it represents the value of all investments remaining in the fund portfolio.

As a fund we need to book the accrual entries. management fee payable entry & MTM Mark to Market entries before starting the preparation of the NAV.

We also vouch the payments made if they booked correctly under their respective heads by checking the invoices of the payments. if they are booked under wrong heads then we will correct it.

Next we will book the accrual entries for the expenses like Audit Fee, Tax Preparation Fee, Adminstration Fee, Custody Fee etc.

Journal entries for quarterly accruals :

Audit Fee Expense a/c                 Dr

         To Audit Fee Payable a/c

Tax Prepaaration Fee a/c              Dr

           To Tax Prep Fee Payable a/c

Admin Fee Expense a/c               Dr

            To Admin Fee Payable a/c

Custody Fee Expense a/c            Dr 

             To Custody fee payable a/c


While booking the entries we will check the allocation rule of the entry, in our firm allocation rule is set as by Commitment & Closing date rounded by UDF.

Management fee calculation is based on the terms & conditions set out in the LPA, calculated sometimes based on the commitment & sometimes based on the net invested capital of the LPs (Investors).

After calculating the management fee as per the terms in the LPA, we will book the entry by off ticking the existing allocation rule & opening the investor allocations, manually allocate calculated mgmt fee to each investor while booking the management fee accrual entry.

Management fee expense a/c       Dr

           To management fee payable a/c

After the voching of expenses & accrual entries booking, we will book the Quarterly MTM entry.

As we made the investment into the companies, the investments will be marked up or down to their fair values so that the investors will know the true value of their investments. Comparibility & Transperency are the two main advantages of fair value.


If investment value is decreased (i.e, Unrealised loss)

Unrealised Loss a/c                   Dr

            To investment a/c

If investment value is increasd (i.e, Unrealised gain)

Investment a/c                          Dr

             To Unrealised gain a/c

After booking the accruals & MTM we can proceed to start the Quarterly NAV. In our firm it is actually excel workbook where we paste different reports from report wizard into the sheets of the workbook which are linked with another (these sheets are basically designed as per client requirements & some are our firm specifically kept across the firm for all clients of the firm) where we calculate the NAV of the fund.

Comments

Post a Comment

Popular posts from this blog

Distributions

 When we receive dividends from the investment or when we sell the one of the investments we have & realized those proceeds, we will distribute the proceed received from those investments to the investors. For our Client funds we will distribute the proceeds only if the amount to be distributed is 2 percent or more than 2 percent of the commitment, so it will be different for different Client according to the wish of those fund managers, we can know those rules from LPA of the respective fund. The following will be the accounting entries we will post during distribution. When we receive distribution, we can know the same from the emails. If we miss the email we can know the same while posting daily cash booking. Generally while posting the journal entries we see the narration in the bank statement & we know the type of expense by narration, if there is any income in the bank statement & if we already check the email regarding distribution (99 percent of the cases we do)...
Read more

Subsequent closings of the fund

Until the final closing of the fund which is the date of final close mentioned in the fund's LPA, usually 1 year from the intial closing date, GP will allow the admission of partners into the fund. These admission of partners in between the intial/ 1st closing & the final closing are know as subsequent closings (we can name them 2nd, 3rd, 4th ....... closings etc.)  We account them similar to the 1st closings, commitment of the fund increases when we admit new partners into the fund in these subsequent closings. But beside these entries we will calculate sub close interest & will charge interest to the new investors & that interest is accrued as income to the existing old investors during that subsequent closing. We will set off that accrued interest income to old investors in future capital calls or closings where we call capital from all investors. The entries will be same as the entries booked on the 1st closing. Receivable entry : Capital call receivable a/c  ...
Read more

Capital Calls/ Drawdowns

In our firm, we call it capital calls as usage, we call the funds from the investors so we can use the money for our intended investments. Along with funds for investments purposes we also call the amounts required for the organizational expenses & management fees. These capital calls are called within the commitment (committed by the investor). Some funds treat the expenses & mgmt. fee as outside the commitment. First client (GP) will send the instructions about his intention to capital call for the investment purpose, then we check the available funds in the fund bank account. When the capital call is for investment, funds are not available generally, also we check whether the funds are sufficient for the fund expenses & mgmt. fee, if not, then we also ask the GP to call for further 2 or 3 quarters of fund expenses & mgmt. fee. GP will gives approval for the same or he will asks to call for only 1 or 2 quarters of fund expenses & mgmt. fee. When the GP approves th...
Read more