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IPEV Board publishes draft amendments to the International Private Equity and Venture Capital Valuation Guidelines

29 October 2015

 

The International Private Equity and Venture Capital Valuation Guidelines Board (“the IPEV Board”) has published draft amendments to the International Private Equity and Venture Capital Valuation Guidelines for consultation.  

 

The IPEV Valuation Guidelines are reviewed periodically by the IPEV Board to ensure they continue to promote best practice when valuing investments and to incorporate changes to accounting standards.  The Valuation Guidelines were last updated in 2012 and this year’s update reflects the experience of industry practitioners applying IFRS 13 (international accounting standards) for three years, as well as continued experience of ASC Topic 820 (US GAAP).

 

The objective of the draft amendments is two-fold.  Firstly, to improve readability throughout the Valuation Guidelines with edits that clarify commentary and formatting changes to signpost content.  Secondly, a number of technical clarifications have been incorporated that include:

 

  • an update on the IASB’s deliberations on the interpretation of the Unit of Account concept when valuing investments;

  • clarifications on how to consider the value of debt for the purposes of determining the value of equity;

  • differentiation between earnings multiples and revenue multiples;

  • removing the negative bias towards discounted cash flow techniques in the previous guidelines and highlighting accounting guidance on the number of valuation techniques to consider;

  • expanded discussion on changes in valuation techniques, calibration, backtesting and the use of multiples; and

  • a number of other edits as set out in the consultation document.

 

David Larsen, IPEV Board Vice Chair and Managing Director at Duff & Phelps, said:

 

“Establishing the fair value of private equity and venture capital investments requires the exercise of informed judgement and the IPEV Valuations Guidelines continue to provide managers and investors with a source of practical and principles-based guidance. The draft amendments reflect the IPEV Board’s accumulated experience of valuing assets and developments in this area.  We welcome feedback from practitioners and investors alike to ensure the Guidelines remain a valuable resource for the industry.”

 

NOTES TO EDITORS

 

1. The IPEV Board and Valuation Guidelines

 

The mission of the IPEV Board is to provide high quality, uniform, globally acceptable, best practice guidance for private equity and venture capital valuation purposes.

 

The IPEV Board was created as an independent body in 2005 and is responsible for maintaining, promoting, monitoring and updating the IPEV Valuation Guidelines. The Board has an advisory role and gives guidance on the application of the Guidelines to all stakeholders in the private equity and venture capital industry including practitioners, investors, regulators and auditors. More information about the IPEV Board can be found here.

 

2. Consultation process

 

To access the draft amendments to the IPEV Valuation Guidelines, please click here.  Comments on the consultation questions, as well as general feedback, is requested by November 27, 2015.  Please send your response to contact@privateequityvaluation.com addressed to David Larsen, IPEV Board Vice Chair.

 

3. Contact details

 

For further information, please contact: