Cutting Edge introduction: Goodwill for DVA

The debit valuation adjustment is a controversial concept when applied to derivatives liabilities, but it has won accountants round. Further thought shows it could be applied more broadly – even to purely positive assets. Laurie Carver introduces this month’s technical articles

The logic of the credit and debit valuation adjustments (CVA and DVA) that form part of the fair value of financial instruments under International Financial Reporting Standard 13 is simple to follow. A cashflow should take account of the risk that the entity paying it defaults, so a firm’s debt assets will have a CVA referencing the counterparty and its financial liabilities a DVA referencing itself.

Seen that way, a DVA for a pure asset, with only positive cashflows – such as a bond, say –

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