Some in Private Equity (Stephen Schwarzman comes quickly to mind…don’t get him started on FAS 157) have railed against recent accountancy changes involving mark-to-market and fair value. Well the IPEV won’t have any of that. This afternoon at a press conference in London, the International Private Equity & Venture Capital Valuation board emphasized its support of fair value methodology as the best measure of assessing the value of private equity portfolio companies and funds.
Given current economic conditions, fair value has become a much discussed and disputed topic of debate due to its inherently subjective nature. A lack of comparables in the current market, thanks to low transaction volumes of illiquid assets and public markets being in an apparent constant state of flux, compounds the dilemma of subjectivity to form a method that some consider more art than science. Hiccups aside, fair value is seen as the proper way forward according to the IPEV.