Whenever I go through banks’ financial statements, I will come across a discussion on non-performing loans or NPLs. This earnings season, I paid a lot of attention to the treatment of NPLs and how it affects a firm’s balance sheet. Basically, if banks cannot collect money on some of the loans, they have to write it off their assets via provisions for losses.
Since I expect that the managers of the companies I hold write their financial statements to reflect their actual financial situation and plan properly, I thought I should apply the same standards to myself. From now on, I will mark my scholarship liability at estimated termination value. As for the liability on my home loan, the loan liability is covered by the home (i.e. selling the home offsets the liability, plus the liability is covered by my CPF “cashflow”). As such, there is no need to...