Module 12

Question 1

What Policies / Procedures are in place for valuing Private Investments for Financial Reporting Purposes?

Answer 1

1) Accounting Standards / Def of Fair Value
2) Valuation Guidance
3) Valuation Process
4) Roles and Responsibilities

Question 2

What is the definition of Fair Value?

Answer 2

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date

Question 3

What are 4 examples that would not cause a deal to be expressed in terms of fair value?

Answer 3

1) Transaction is consummated between related parties
2) Transaction takes place under duress or under forced sale
3) Unit of Account represented by transaction price is different from the unit of the account for the asset or liability measured at fair value
4) Market in which transaction takes place is different from principal or most advantageous market

Question 4

What typical Recommendations are included in valuation guidelines?

Answer 4

1) Prepared as at a point in time
2) Reflect assumptions, market, and economic conditions as at valuation date
3) Completed in accordance with generally accepted practices or approaches and are applied in a consistent basis

Question 5

What is an Investment Entity Review Report?

Answer 5

The Conclusion as to the reasonableness of value as determined by the manager of an “investment entity” or another party other than the CBV

Question 6

What are the 6 Main Aspects of the Valuation Process?

Answer 6

1) Appropriate Valuation Frequency
2) Independence
3) Consistency
4) External Independent Valuations/Valuation Reviews
5) Valuation Committees
6) Audit Review

Question 7

List 5 Examples of Subject Experts

Answer 7

1) Real Estate - Appraisers are commonly engaged by private market investors to assess value of real estate holdings
2) Oil & Gas Engineers - Private Market relies on 3rd party firms to provide reports and prepare NAV estimates
3) Actuarial Consultants - Insurance investments seek professional opinion of 3rd party actuaries in determining the embedded value of the insurance firm
4) Timber and Renewable resource appraisers - Expertise in timber/harvest/crop assets may be sought by private market investors from third party external appraisers
5) Technology - Due to rapid pace of innovation, engage tech consultants to provide expertise and assistance in assessing value of tech investments