Private and Equity and Hedge Fund Assets (ASC 820)

The valuation of private equity investments and hedge funds can be a challenging exercise due to the illiquid nature of the assets as well as other complexities involved. Moreover, private equity and hedge fund valuations have been subject to increased review from both investors and regulators. The International Private Equity and Venture Capital Valuation Guidelines, Private Equity Industry Guidelines Group, and U.S. Private Equity Valuation Guidelines help provide a framework for valuing such investments at fair value that is consistent with U.S. GAAP accounting and FASB Accounting Standards Codification Topic 820 (“ASC 820”). ASC 820 prescribes a principle-based fair value measurement that is consistent with market participant assumptions. “Fair value” is defined in ASC 820 as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” Given the complexities and increased review by investors and regulators, when determining the value of these assets, it is critical to engage a qualified business appraisal firm.

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