What’s new with ASC 820 guidance


AICPA sets ASC 820 guidance, which is part of the Financial Accounting Standards Board’s (FASB) Generally Accepted Accounting Principles (GAAP) guidance. As a venture capital firm, you need to follow these guidelines. 

To help improve consistency across ASC 820 valuations, FASB released final guidance in August 2019. For those of us at Carta, the most interesting takeaways from the guidance are:

  • Market participant perspective: The guidance suggests that when determining how the Company has performed over time, you should consider the metrics that market participants or investors considered relevant in the most recent transaction when investing. Additionally, once you have arrived at the fair value of your investment, you should consider whether a market participant would truly invest in the Company at fair value as of the valuation date. 
  • Discounts (control and marketability): The guidance suggests incorporating some qualitative judgement into discounts for control and marketability.
  • Backtesting: When your fund experiences a liquidity event, the guidance suggests circling back and comparing the actual price per share with the most recent calculated FMV. This practice is meant to identify any areas of your valuation policy that may need to be revisited.

We recently hosted and recorded a panel at Carta with ASC 820 Valuations Manager, Stephanie Wittrock, and ASC 820 Product Specialist, Benjamin Tobin.

The best way you can insure your ASC 820 valuation is done properly is to choose a reputable and experienced provider, like Carta. In addition to ASC 820 valuations, Carta also offers products and services like fund administration.

DISCLOSURE: This communication is being sent on behalf of Carta Valuations, LLC, an affiliate of eShares, Inc. dba Carta, Inc. (“Carta”). Certain transactional fees may apply. This communication is not to be construed as legal, financial or tax advice and is for informational purposes only. This communication is not intended as a recommendation, offer or solicitation for the purchase or sale of any security. Carta does not assume any liability for reliance on the information provided herein.

Subscribe

Stay up to date with monthly blog highlights

Related articles


What is ASC 820?

ASC 820 offers guidance on how to value illiquid assets and stands for Accounting Standards Codification 820. Watch our recent webinar to learn more.

Simplify how you manage your portfolio

Tracking key metrics for just one company can be difficult, and comparing performance across your portfolio is nearly impossible—especially when each company’s data is in a different format.

Carta Investor Services

By automating the information flow between companies to funds to LPs, we hope to reduce the administrative burden associated with private market investing.

© 2019 ESHARES, INC. DBA CARTA, INC.