After several years in the works, the AICPA has issued a draft “Accounting and Valuation Guide” that provides “nonauthoritative guidance” for valuing private equity and venture capital investments. It addresses many accounting and valuation issues regarding portfolio company investments held by investment companies within the scope of FASB ASC 946. The guide is also useful for other entities, such as corporate venture capital groups or pension funds.
Where to focus: The guide has 14 chapters, many examples, and a number of appendices. Valuation experts should pay particular attention to the background on the industry in Chapter 1. Also of interest is the material in Chapter 4, “Determining the Unit of Account and the Assumed Transaction for Measuring the Fair Value of Investments,” which sets the context for the valuation and gives examples. Chapters 5 to 9 also deal with valuation, and especially of interest is the discussion on premiums and discounts in Chapter 9 (“Control and Marketability”). Also, you should check out Chapter 10, “Calibration.”
Comments on the working draft are due August 15, and you can email them to Yelena Mishkevich (Yelena.Mishkevich@aicpa-cima.com). All comments will be kept confidential and will not be posted on the AICPA website.
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