Complex capital structures, complex valuations: The AICPA's new private equity/venture capital valuation Practice Aid

Published by Paul Daddio and Frank J. Walker

By its nature, valuation is highly complex and subjective; particularly when it comes to the valuation of companies with complex capital structures, which are common among portfolio companies held by private equity and venture capital funds. In an effort to improve the quality, consistency, and reliability of valuations, the AICPA has developed a Practice Aid on the valuation of portfolio companies, entitled “Valuation of Portfolio Company Investments of Venture Capital and Private Equity Funds and Other Investments”.

The Practice Aid provides guidance for preparers of financial statements, auditors and valuation specialists as to best practices relative to the valuation of investment interests for financial reporting purposes in connection with ASC 946, Financial Services – Investment Companies in the application of ASC 820, Fair Value Measurement.

Baker Tilly’s white paper provides key insights into the Practice Aid and practical analysis as to the impact it is intended to have on the preparation of valuation analyses in the fund industry and beyond. Because the AICPA’s Practice Aid calls for more rigorous application of valuation methodologies than are typically used by many funds and companies, the Baker Tilly white paper is critically important reading for fund managers, valuation specialists, auditors, investors and stakeholders generally.

For more information on this topic, or to learn how Baker Tilly's valuation specialists can help, contact our team.