I am not quite sure I understand the issues in Calculating NAV.
First, NAV is only adjusted when there are subsequent rounds of financing. (Why this is a problem in Calculating NAV? It is just the problem of knowing the NAV but not the issues of calculating NAV?)
Second, undrawn LP capital commitments are not included in NAV but are essentially liabilities for the LP. (In my point of view, undrawn LP capital commitments is the committed capital but not invested yet. Why is it related to NAV? I am somehow understand that you committed to pay certain capital but not pay yet, so it is liabilities. But I am not understand why it is matter for NAV. ) Beside, The value of commitments depends on the cash flows generated from them, but this is quite uncertain. When a GP has trouble raising funds, this implies that value of commitment is low. (I thought “GP has trouble raising funds”, so they need to use all committed capital, the commitment value should be high?)
You need to think about each side of the accounting entry. If you did include the partner’s uncalled commitment as a liability on the balance sheet, then the other side of the entry would have to be a receivable on the balance sheet, which would net it out. Your NAV will just show the net result of called capital +/- P&L earned on it. Hope that makes sense?
Thank you so much! But I am not sure what you mean. As it state that undrawn LP capital commitments are not included in NAV but are essentially liabilities for the LP, which means it is not in Venture capital B/S? If it is in Venture capital B/S, it should also include in NAV?
The partner themselves does have a liability to the partnership for their commitment, but you’re only preparing a balance sheet for their investment in the partnership, not their own personal balance sheet. If they have committed 100 but only 10 has been called so far, the NAV of their interest in the partnership will be 10 +/- P&L earned on it.