What is HLBV?

HLBV (Hypothetical Liquidation at Book Value) is a balance sheet-oriented method of accounting that provides an approach for allocating pre-tax GAAP income or loss to an investor. HLBV is commonly used in renewable energy partnerships due to the existence of VIEs (variable interest entities), which rules out the use of the Equity Method of Accounting. HLBV allocates pre-tax GAAP income or loss to the partners (investors) and calculates at the end of each measurement period (monthly, quarterly, or annually) the amount each partner would receive in the event the partnership were liquidated at book value. The allocated amount to each partner will change based upon a pre-determined Flip Point (IRR). Determining the amount allocated to each partner requires an analysis of each partners’ capital account as adjusted according to the liquidation provisions of the partnership agreement.

The Problem

Until now, no automated HLBV software application has been available in the renewable energy marketplace that would allow analysts and portfolio managers to model and calculate HLBV. As a result, they have relied heavily on commonly used financial spreadsheet software which has proven to introduce an increase in risk and inefficiencies. Some of the underlying risk factors and inefficiencies include:

  • Large spreadsheet design requiring excessive User maintenance time
  • Complex and cumbersome formulas that are difficult to audit
  • Insufficient data validation and controls
  • Potential data input and output errors
  • Limited management reporting
  • Informal approval process
  • Lack of standardization in spreadsheet design among deals and across portfolio
  • Inadequate backup and recovery procedures and processes
  • Minimal technical and User documentation

Due to a lack of an automated software application, renewable energy partnerships are dealing with regulatory and financial risk due to manual modeling and reporting. Analysts are constantly forced to make trade-offs between the quality and timeliness of their analysis and financial reporting.

Our Solution

Wability, Inc. has successfully created an industry unique, state of the art, modeling application, HLBV Pro, enabling analysts to shift their focus from time intensive modeling and data manipulation to analysis, accurate financial reporting, and effective decision making. This software application, with its rules-based engine, greatly improves the User’s ability to track, analyze and manage their complex financial transactions and entire portfolio.

HLBV Pro captures and models the provisions defined in the transaction documents, which governs cash flows, IRR calculations, Flip Dates and corresponding allocation percentages, among other key parameters and calculations. The rules-based engine can be customized to be either web-based (browser) or a desktop application and can accommodate various deal structures. Users will have access to only those functionalities associated with their unique role and will receive comprehensive training in the use of the software application including how to upload new deals and make changes to those already residing in the system.

Benefits of HLBV Pro include:

  • the ability to model, analyze and manage complex transactions
  • significant reduction of spreadsheet risk from input errors and reporting inaccuracies
  • user-friendly front end interface
  • audit trail reports highlighting all manual adjustments to input data.

The benefits of HLBV Pro are numerous, especially when faced with all of the inherent risks of spreadsheet accounting. Save time, money and increase output reliability today.

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