Equity Reconciliation
What does it mean
Equity Reconciliation means being able to identify the underlying sources for why a borrower’s equity changes over time. Borrower equity primarily changes for one of the below listed reasons:
- Market Value Adjustments (only in Market Value balance sheets, not cost balance sheets)
- Owner Contributions and/or Distributions
- Income or Loss
Why does it matter
Understanding how to reconcile equity is beneficial for understanding “how” a business got to where it is. Equity can be obtained through a variety of methods. The owners could have started by putting in a bunch of capital and then the operations could have lost it all, or the business could have started with nothing and built up their equity by generating profits. By being able to reconcile their equity from year to year, you can see “how” they business got to where it is.
Other Relevant Terms
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A bit about me
Greetings! I'm Clay Sharkey, and there is nothing I like more than assisting others in achieving their goals. I firmly believe that by enhancing a banker's understanding of their customer's' business, they can provide superior service. This superior service, in turn, leads to stronger relationships for the bank, improved performance for the businesses, and better experiences for our communities. Win-win-win.
