A group of 21 European and international associations has endorsed private equity and venture capital valuation guidelines that were developed in March 2005 for consistency with IFRS and US GAAP accounting principles.
The group comprises 15 European national associations, five associations from Africa, Australia, Hong Kong, Russia and South Africa and the International Limited Partners Association (ILPA). The guidelines were developed by the Association Francaise des Investisseurs en Capital (AFIC), the British Venture Capital Association (BVCA) and EVCA.
Following the endorsement, an independent board reporting and accountable to a general assembly of the associations will manage the evolution of the guidelines going forward. It will assess market practices in the use of the guidelines along with the evolution of global accounting standards.
The board will also propose amendments to the guidelines following any relevant changes to accounting standards and market practices and will formally review the recommendations every three years.
Valuation guidelines are used by the private equity industry for valuing investments and provide a framework for fund managers and investors to monitor the value of existing investments. The new guidelines are based on the overall principle of “fair value” in order to be consistent with IFRS and US GAAP.
“The international valuation guidelines represent a real step forward for the private equity industry. They are consistent with the new international accounting rules, integrate the dilution of equity, as well as preferred shares, and contribute towards building greater investor confidence in the private equity industry,” said Dominique Oger, chairman of AFIC and AtriA Capital.
Due to recent initiatives taken by the French government, French insurance companies will invest up to €6bn in private equity over the next three years.
Anne Glover, immediate past chairman of the BVCA and chief executive officer of Amadeus Capital, said the valuation guidelines demonstrated that the industry was addressing the trend towards globalisation of all asset classes.
The guidelines are endorsed by:
- AIFI – Italian Private Equity and Venture Capital Association
- APCRI – Portuguese Private Equity and Venture Capital Association
- ASCRI – Spanish Private Equity and Venture Capital Association
- AVCA – African Venture Capital Association
- AVCAL – Australian Venture Capital Association
- BVA – Belgian Venturing Association
- BVK – Bundesverband Deutscher Kapitalbeteiligungsgesellschaften/German Private Equity and Venture Capital Association eV.
- CVCA – Czech Venture Capital and Private Equity Association
- DVCA – Danish Venture Capital Association
- HKVCA – Hong Kong Venture Capital Association
- HVCA – Hungarian Venture Capital and Private Equity Association
- ILPA – Institutional Limited Partners Association
- IVCA – Irish Venture Capital Association
- LVCA – Latvian Venture Capital Association
- NVCA – Norwegian Venture Capital & Private Equity Association
- NVP – Nederlandse Vereniging van Participatiemaatschappijen
- PPEA – Polish Private Equity Association
- RVCA – Russian Private Equity and Venture Capital Association
- SAVCA – Southern African Venture Capital and Private Equity Association
- SECA – Swiss Private Equity and Corporate Finance Association SLOVCA – Slovak Venture Capital Association