EVE/NEV Treatments
All detail-level balance sheet accounts must have an Economic Value of Equity (EVE)/Net Economic Value (NEV) treatment assigned.
The assignments are done on the Risk panel on the Chart of Accounts Setup page.
The selected treatment determines how the account is handled during EVE/NEV calculations. Each treatment produces different results. The available options are:
- None - Use this treatment when accounts are not included in the EVE/NEV calculation or in EVE/NEV reports.
- Book - Use this treatment when the calculated EVE/NEV value is equal to the balance of the account.
- Discount - Use this treatment when the EVE/NEV value of an account is calculated using discounting techniques based on cash flows. This treatment is only available for rate-bearing balance sheet accounts.
- FAS 107/Discount - Use this treatment when the book value of the accounts is calculated for Financial Accounting Standard (FAS) 107 purposes. For economic value calculations, decay rates are applied to discount their cash flows.
- Quote/Discount - Use this treatment when actual market values are known for the current month. Review and modify quoted accounts by following the Quoted Market Value link on the Validation tab on the EVE/NEV page. If you are calculating EVE/NEV for a future month, then discounting is used to calculate the values.
- Supervisory Test/Discount - Use this treatment for modeling a specified premium or discount to non-maturity share accounts for various rate shock scenarios. Custom scenarios always use Discount results. This NEV method is only available for credit unions.
| Specific Account Type | Rate Bearing | EVE/NEV Treatment | Discount Rate | Spread Method |
|---|---|---|---|---|
| Non-rate-bearing assets (cash, fixed assets, etc.) | No | Book | N/A | N/A |
| Loans | Yes | Discount | Treasury Yield Curve | WAL |
| Investments | Yes | Quote/Discount | Treasury Yield Curve Note: The
Discount treatment for investments is only used when
calculating NEV/EVE for future time periods. Calculations for the current month in
the application use the Quote treatment.
|
Varies based on security type |
| Unrealized gain/loss on investments | No | None | N/A | N/A |
| Non-rate-bearing, non-maturity deposits (checking, share drafts, etc.) | No | FAS 107/Discount* or Supervisory Test/Discount (NEV only) | Composite FHLB Yield Curve | Manual with a Discount Spread of 0.000 percent |
| Rate-bearing, non-maturity deposits (savings, shares, club accounts, MMDAs, etc.) | Yes | FAS 107/Discount* or Supervisory Test/Discount (NEV only) | Composite FHLB Yield Curve | Manual with a Discount Spread of 0.000 percent |
| Time deposits (CDs, IRAs, etc.) | Yes | Discount | N/A | Manual with a Discount Spread of 0.000 percent |
| Non-rate-bearing liabilities (interest payable, accruals, etc.) | No | Book | N/A | N/A |
| Capital | No | None | N/A | N/A |
* Set up with a Decay Rate method for EVE/NEV calculations.