Asset Valuation Reserve - AVR


DEFINITION of 'Asset Valuation Reserve - AVR'

Capital required to be set aside in order to cover a company against unexpected debt. The asset valuation reserve serves as a backup for equity and credit losses. A reserve will have capital gains or losses credited or debited against the reserve account.

BREAKING DOWN 'Asset Valuation Reserve - AVR'

Usually the asset reserve consists of two components, a default component and an equity component. The default component protects future credit related losses, and includes arrangements for corporate debt securities, preferred stock, mortgage backed securities, farm, commercial and residential mortgages. For example, the National Association of Insurance Commissioners (NAIC) has to keep a liability reserve to cover claims in real estate and mortgages. The equity component has provisions for common stocks and real estate.

  1. Working Reserves

    Reserves held by banks above the required minimum level - or ...
  2. Loan Loss Provision

    An expense set aside as an allowance for bad loans (customer ...
  3. Allowance For Doubtful Accounts

    A contra-asset account that records the portion of a company's ...
  4. Default Probability

    The degree of likelihood that the borrower of a loan or debt ...
  5. Bad Debt Reserve

    An account set aside by a company to account for and offset losses ...
  6. Default Risk

    The event in which companies or individuals will be unable to ...
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