The International Private Equity & Venture Capital Valuation Guidelines Board (“the IPEV Board”) today released a new FAQ focused on the implications of the US Financial Accounting Standards Board’s (FASB) recent change mandating the consideration of contractual restrictions in Fair Value measurements.
The IPEV Board continues to dynamically respond to emerging developments in the valuation of private investments. Following FASB’s September 2026 change to its Fair Value rules, the Board received a number of questions about its impact on the IPEV Valuation Guidelines and its interaction with IFRS 13 Fair Value principles.
The new FAQ addresses those questions by reemphasizing that a Market Participant view should be taken into account when estimating Fair Value, including considering the impact of contractual restrictions such as underwriters’ lockups.
“We support FASB’s amendment requiring the impact of contractual restrictions to be reflected in Fair Value measurements,” said IPEV Board Chair Timo Strunkmann-Meister. “FASB ASC Topic 820, IFRS 13 and the IPEV Guidelines are now aligned in supporting a Market Participant view in estimating the Fair Value of securities with contractual restrictions.”
The new FAQ dealing with contractual restrictions is included below.
The IPEV Board expects to release a full update to its FAQs before the end of the year, covering a number of other important questions relating to Fair Value estimation in compliance with the IPEV Valuation Guidelines.
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, consisting of LPs, GPs, and service providers, 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. Contact details
For further information, please send an email to [email protected].
New FAQ on contractual restrictions
Question:
In September 2026, the US FASB amended ASC Topic 820 to require the impact of contractual restrictions to be reflected in Fair Value. How does this change impact the IPEV Valuation Guidelines, and does it result in a difference between IFRS and US GAAP?
Answer:
The IPEV Valuation Guidelines continue to support taking into account a Market Participant’s view which would reflect the impact of a contractual restriction when determining Fair Value.
Section I 3.6 (iii) of the IPEV Valuation Guidelines indicates that a Market Participant view should be taken into account in determining the principal or most advantageous market for transactions of securities with contractual restrictions and whether such market would consider the contractual restrictions in their valuation. Based on the judgement of the valuer, some have applied a discount, and some have not applied a discount for contractual restrictions.
With the issuance of ASU 2026-03 in September 2026 FASB has effectively reversed their position taken in 2022 where they prohibited taking into account contractual restrictions in determining Fair Value. The IASB did not amend IFRS 13 in 2022 or 2026. IFRS 13 paragraph 22 states: “An entity shall measure the fair value of an asset or a liability using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.”
The new FASB amendment is required for reporting periods beginning after 15 December 2027, with early adoption allowed. The new FASB rule mandates that contractual restrictions be taken into account in determining Fair Value. IFRS continues to allow a discount for a contractual restriction to the extent it would be taken into account by a Market Participant. Practically, the buyer of securities with contractual restrictions would be obligated to comply with such contractual restrictions meaning that a Market Participant would take them into account.
It should be noted that FASB and IFRS continue to prohibit taking a “blockage” discount for large blocks of shares which are actively traded.
Further IFRS vs US GAAP background
Prior to FASB’s 2022 amendment that prohibited taking into account contractual restrictions, most practitioners agreed that IFRS 13 and ASC Topic 820 were fully aligned. Both allowed an adjustment based on Market Participant perspectives for a contractual restriction depending on facts and circumstances.
When FASB issued ASU 2022-03, which prohibited taking into account contractual restrictions, IFRS 13 did not change. That means that over the past three years, IFRS and US GAAP have deviated from one another at a conceptual level. In practice, many institutions that were required to report both under IFRS and US GAAP, exercised their judgment when necessary and decided not to take a discount for contractual restrictions allowing for the possibility of compliance under both standards.
FASB’s change dictated by ASU 2026-03 that a contractual restriction must be taken into account under US GAAP, realigns with IFRS which continues to allow a contractual restriction that would be reflected by a Market Participant to impact the Fair Value conclusion. Once the new FASB amendment is effective, discounts will be required by US GAAP and will continue to be acceptable under IFRS.