Private Equity

How Valuation is Changing with ASC 820 within Private Equity

Accurate and transparent investment appraisal is crucial for private equity investors. In this post, we will look at the significance of ASC 820 and how it affects private equity investments. Understanding the complexity of ASC 820 is critical for all investors, from rookie analysts to seasoned managing directors.

What is ASC 820?

ASC 820, or Accounting Standards Codification 820, is a financial reporting standard that gives guidelines on the valuation of investments, particularly those owned by private equity groups. The purpose of ASC 820 is to develop a framework for assessing fair value and to maintain uniformity across all financial statements. The standard mandates corporations to provide information about their valuation methodologies and inputs, offering openness to investors.

Why is ASC 820 necessary for private equity investments?

Private equity transactions sometimes entail complicated and illiquid assets, making correct assessment difficult. ASC 820 establishes a uniform framework for evaluating fair value and maintaining transparency in financial reporting. To make educated investment decisions, private equity investors must comprehend the ASC 820 regulations.

How does ASC 820 affect private equity investments?

ASC 820 has a substantial influence on private equity transactions. Secondly, it compels corporations to publish information about their valuation methodologies and inputs, helping investors to better understand how the company arrived at a fair value for their assets. Second, it creates a uniform methodology for assessing fair value, allowing investors to make educated judgments based on similar facts. Lastly, ASC 820 has a direct influence on financial reporting, altering how organizations present their financial statements and engage with investors.

Real-world instances of ASC 820 in action

The valuation of private equity portfolio firms is one real-world illustration of ASC 820 in operation. Private equity firms may own a diverse range of assets, including stock and debt securities, real estate, and other complicated financial instruments. ASC 820 offers guidelines on how to value these assets, including utilizing market data, discounted cash flow analysis, and other acceptable valuation approaches. This helps to guarantee that portfolio firms are appropriately valued and that investors have a clear knowledge of their investment performance.

Another example is the influence of ASC 820 on financial reporting. While producing their financial statements, private equity funds must adhere to ASC 820, which includes declaring the fair value of their interests. This may be a tough procedure for private equity firms because many of their investments are illiquid and difficult to appraise. Nonetheless, by adhering to ASC 820 requirements and offering open disclosures, private equity firms can boost investor trust and confidence in the fund's performance.


Finally, ASC 820 is an important standard for private equity investors to comprehend. ASC 820 aids investors in making informed investment decisions by creating a uniform framework for evaluating fair value and demanding transparent disclosures. Understanding the complexity of ASC 820 will be critical for success in the private equity business as it evolves. To make the most of their investments, both young analysts and seasoned managing directors must keep current on the newest advancements in ASC 820.

Vetted, Certified,
Speed in Hiring

Begin growing your portfolio companies within a few clicks

Questions Before Getting Involved? Reach Out Below

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.