News, Resources and Updates

AICPA: New Case Studies included in the Working Draft of the Guide to the Valuation of PE/VC Investments in Portfolio Companies

On December 17, 2018, the AICPA issued a working draft of two new case studies for its Accounting and Valuation Guide: Valuation of Portfolio Company Investments of Venture Capital and Private Equity Funds and Other Investments. New Case Study 4A, Value Fluctuations in a Real Estate Investment Financed with Debt, illustrates real estate specific valuation considerations as well as the impact of mortgage debt valuation on the equity value of a real estate investment. The other case study, Investment in Non-Performing Distressed Debt (Investment 6 in Case Study 13) illustrates the valuation of an investment in distressed debt by a business development company from the initial transaction through subsequent measurement dates. Investment 6 illustrates the application of calibration using synthetic ratings and scenario analysis, combined with observations on the changes in market yields and the underlying credit quality of the borrower. The case also highlights the qualitative factors that should be considered in assessing the credit risk of the investee. Comments should be sent by January 14, 2019 to Yelena Mishkevich at yelena.mishkevich@aicpa-cima.com