Recently, the Private Equity and Venture Capital Taskforce of the AICPA published an Accounting Guide entitled, ‘Valuation of Portfolio Company Investments of Venture Capital and Private Equity Funds and Other Investment Companies’. The purpose of this Guide is to help investment companies estimate the fair value of their portfolio company investments, consistent with market participant assumptions.
The guidance put forth by the AICPA Taskforce is considered best practices for valuation analyses performed for financial reporting purposes. Specific to venture capital and early-stage investors, the Guide addresses the selection of valuation methodologies and assumptions, since “traditional” approaches may not be appropriate for the valuation of early stage and pre-revenue stage entities.
One of the more challenging aspects of the valuation of venture and early stage entities is the selection of an appropriate methodology for allocation equity across complex capital structures. In light of this, and to proactively approach the financial reporting requirements for fiscal 2018, we have highlighted several sections of the AICPA Guide and are providing them here.
We encourage your team to review the new guidance and the related examples provided, as you plan for the fiscal 2018 audit.
Specifically, the sections of the Guide provided include:
Author: Michelle Keyes, ASA | firstname.lastname@example.org
For additional information or questions, please contact Withum’s Private Equity and Venture Capital team by filling in the form below. For more information on the AICPA Accounting Guide, visit aicpa.org