Volatile public markets combined with economic uncertainty related to the COVID-19 response has created a challenging environment to estimate the fair value of non-traded or infrequently traded debt and equity investments. The AICPA Accounting and Valuation Guide: Valuation of Portfolio Company Investments of Venture Capital and Private Equity Funds and Other Investment Companies published in August of 2019 provides excellent guidance in estimating fair value for such investments. Yet uncertainty and public market volatility during 2020 has raised questions as to whether changes to past practices are warranted and whether fair value can be reliably measured during times of volatility and uncertainty.
Determine whether valuation methods should change in times of uncertainty and volatility
Determine whether the fair value measurement objective for Investment Companies changes or should change in times of excess volatility
Analyze whether valuation inputs should change because of volatility
Distinguish whether the practical expedient with respect to valuing fund interests is viable in times of significant uncertainty
Identify changes to valuation inputs, methods and conclusions necessary to comply with ASC Topic 820 in times of significant uncertainty