Statement on Fair Value Measurement and Disclosure Considerations for Private Assets

Who may be interested: Registered Investment Companies; Directors of Registered Investment Companies; Investment Advisers; Broker-Dealers; Compliance Officers

Quick Take: In light of growing investment in, and accessibility to, private assets, including private credit, the SEC’s Chief Accountant and Director of the Division of Investment Management issued a statement reminding registrants to maintain rigor in valuing private assets and in meaningful disclosure regarding valuation methodologies and portfolio risks.

On September 28, 2026, the SEC’s Chief Accountant and Director of the Division of Investment Management issued a Statement on Fair Value Measurement and Disclosure Considerations for Private Assets (the “Statement”) addressing fair value measurement and disclosure considerations for private assets, including private credit investments. The Statement emphasizes that the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, “Fair Value Measurement” and, when involving investment companies, the valuation and disclosure provisions, regulations, and disclosure obligations under the Investment Company Act of 1940 (“1940 Act”), already require robust valuation practices, governance, and transparent disclosure.

With private credit investments held by registered funds increasing from approximately $170 billion in 2020 to approximately $270 billion in 2025, the Statement addresses the significant valuation judgments often required for these generally illiquid investments.

Private Credit: Key Valuation Process Reminders

Timely Access to Relevant Information Remains Critical

Timely access to reliable borrower information remains critical to the fair valuation process, and a lack of timely information does not relieve management of its responsibility to estimate fair value. Management should consider whether reporting obligations in an arrangement provide sufficient and timely information to support ongoing monitoring and reporting.

Fair Value Must Reflect Market Participant Assumptions

Fair value measurements must incorporate assumptions that market participants would use and may require consideration of reasonably available market information beyond borrower-specific data. In practice, this may require consideration of broader market factors, including prevailing credit spreads, liquidity conditions, comparable transactions, secondary market activity, and compensation for investment risk.

Importance of Calibration

Calibration remains an important valuation tool, with the transaction price when an investment is first acquired serving as a key benchmark. Periodic comparison to available market information can help ensure that valuation conclusions continue to reflect market participant assumptions.

Private Credit: Disclosure Considerations

Level 3 Fair Value Disclosures

The Statement notes that ASC Topic 820 requires meaningful disclosure regarding the valuation techniques used to determine fair value, the significant unobservable inputs used in the determination, and how changes in the inputs might result in different fair valuations. The Statement also cautions against disclosures that are generic or present information on an overly aggregated basis, which fails to provide investors with meaningful insight into how private assets are valued.

Portfolio Risk Characteristics and Income Quality

The Statement notes that disclosure regarding restructurings, maturity extensions, non-performing investments, non-accrual practices, payment-in-kind interest, and changes in portfolio risk characteristics over time may be material to investors’ understanding of a portfolio’s overall risk profile. The Statement explains that such disclosure may help investors better understand the quality of reported income, impacts to fair value, and changes in portfolio risk characteristics. The Statement further notes that disclosure regarding payment-in-kind interest, including the extent to which it represents a growing portion of reported income, may help investors assess the quality and sustainability of a fund’s income stream and potential increases in credit risk.

Private Fund Secondary Activity and the NAV Practical Expedient

The Statement devotes significant attention to the application of NAV as a practical expedient, particularly in light of continued growth in the secondary market for private fund interests. The Statement reminds registrants that use of the practical expedient is optional on an investment-by-investment basis and that management retains responsibility for determining whether the conditions for its use have been satisfied. The Statement also notes that registrants should consider reasonably available information, including evolving secondary market information, when assessing whether reported NAV is calculated consistently with FASB ASC Topic 946, “Financial Services – Investment Companies”, and emphasizes that such assessments require professional judgment.

Audit Considerations and Practical Implications

The Statement emphasizes the important roles of management, boards, valuation designees, and auditors in ensuring that investors receive rigorous and transparent financial reporting regarding private assets measured at fair value. The Statement also highlights the importance of auditor professional skepticism when evaluating fair value estimates that rely on significant judgment or unobservable inputs. Registered funds, BDCs, fund boards, valuation designees, and advisers should consider these observations in light of existing valuation obligations, including under 1940 Act Rule 2a-5, while also reviewing valuation procedures, calibration practices, disclosures, and procedures supporting use of the NAV practical expedient.

Conclusion

The Statement does not create new legal obligations, but reinforces existing requirements regarding valuation practices, governance, and disclosures for private assets measured at fair value. As private asset strategies continue to expand, registrants should ensure that investors receive clear and meaningful information regarding valuation methodologies, portfolio risks, and the judgments underlying fair value measurements.

The Statement is available here.