Difference Between NAV & Market Value Reconciliation

Differentiating between financial or business terms can prove difficult for the average person, particularly with obscure terms such as "market value reconciliation." Though "net asset value," or NAV, and market value reconciliation sometimes appear alongside one another in financial literature, these terms differ in ways that are significant and often fundamental. NAV specifically refers to the assets of a company, less its liabilities. But market value reconciliation is a broader business valuation that also considers a company's cash disbursements, lost or gained income and other contributing factors.

"NAV" is a relatively simple financial term. Net asset value indicates the value of all assets of an investment company, minus its liabilities. This definition also applies to funds such as mutual funds and hedge funds. Liabilities constitute any outstanding debts, such as loans or bonds. A firm’s NAV can vary significantly on a daily basis depending upon the state of its investments. According to the U.S. Securities and Exchange Commission, mutual funds and unit investment trusts must calculate NAV on a daily basis.

"Market value reconciliation" is a more obscure term that can mean either of two things. With regard to business, market valuation reconciliation constitutes the market value of a company after accounting for lost or gained income, asset valuation changes, cash disbursements, receipts and overall changes in value during a period. This process earns its name by reconciling a posted market value with changes incurred since the posting of that value.

Value reconciliation in real estate constitutes the process of assigning a market value to a property by reconciling all possible factors affecting value, including market trends, location, demand, condition and more.

Two fundamental differences separate NAV from market value reconciliation. Although market value reconciliation can refer to either of two things depending on the context, NAV has a very specific definition.

Furthermore, NAV considers the value of a company or fund based on its assets. Market value reconciliation focuses on market value. Market value derives from the price of and the demand for stocks, which might or might not correlate directly to a company's book value based on assets and liabilities.

Calculating market value reconciliation in companies and NAV requires simple math -- addition and subtraction, assuming you know the company's or fund's previous market value, asset value and liability value.

Market value reconciliation in real estate requires a more complex approach to determining value. This often involves the discretion of a real estate appraiser.

Furthermore, accountants use NAV to calculate net asset value per share for a fund or investment company. Market value reconciliation, on the other hand, generally occurs only at the level of total firm or fund evaluation.