Can Someone Please Explain the Valuation of Notes Payable (Imputing interest)

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  • December 4, 2019 at 11:52 am #2828355
    RKT
    Participant

    I’m having trouble understanding the valuation of notes payable, especially when it comes to the interest rate being reasonably low or not stated (imputing interest) vs. when it’s not. Can someone please explain it? Thank you!

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  • December 6, 2019 at 11:20 pm #2832642
    ali.ikram
    Participant

    From my understanding, when a Notes Payable is shorter than 1 year you use the FMV vs if it is longer than 1 year, you use the Present Value using Time Value of Money with the (effective,market,yield) interest rate.

    December 7, 2019 at 6:20 pm #2833773
    deon
    Participant

    As far as imputed interest goes, the only time a non stated interest rate matters is if the note payable is in exchange for a good or service. Then it goes by the implied interest rate that’s always given. Hope that helps.

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