SEC Staff Issues Reminder on Fair Value and Disclosure Considerations for Private Assets

On Sept. 28, 2026, the U.S. Securities and Exchange Commission’s (“Commission’s”) Chief Accountant and the Director of the Division of Investment Management issued Statement on Fair Value Measurement and Disclosure Considerations for Private Assets (“Statement”) reminding registrants of the importance of maintaining rigorous fair value measurement processes and providing transparent, entity-specific disclosures for private assets, particularly private credit investments. The Statement recognized the continued growth of private assets and emphasizes that robust valuation practices and meaningful disclosures are critical to helping investors understand reported values and portfolio risks.

Private Credit Considerations

The Statement noted that private credit assets are typically illiquid, individually negotiated loans that do not trade on established secondary markets and therefore generally lack readily available quoted prices. As such, determining their fair value frequently requires the use of significant unobservable inputs, meaning these measurements are typically categorized as Level 3 within the fair value hierarchy established by FASB ASC Topic 820.

Key Valuation Reminders

The Statement highlighted several areas requiring significant judgment under ASC 820, Fair Value Measurement:

• Management remains responsible for estimating fair value even when timely borrower information is not available.
• Fair value measurements should reflect a market participant perspective, not solely entity-specific expectations. Management may need to consider broader market factors such as credit spreads, liquidity conditions, and risk premiums when appropriate.
• Calibration remains an important aspect of the valuation process. Initial transaction prices should serve as a benchmark for subsequent measurements, with valuation models reassessed as market conditions evolve.

Disclosure Expectations

The staff also reminded registrants that ASC 820 requires meaningful disclosures for Level 3 fair value measurements, including:

• The valuation techniques used;
• Significant unobservable inputs, such as discount rates and credit spreads; and
• How changes in those inputs could materially affect reported fair values.

The Statement cautions against boilerplate or overly aggregated disclosures and encourages clear, entity-specific information that helps investors understand valuation judgments and measurement uncertainty.

Portfolio Risk Transparency

The SEC staff emphasized the importance of transparent disclosures that help investors understand portfolio risk characteristics and performance trends. Areas identified as potentially material include:

• Modifications, restructurings, extensions, and non-accrual investments;
• Criteria used to classify assets as non-accrual; and
• The nature and significance of payment-in-kind (PIK) interest and its impact on reported income and credit risk.

NAV Practical Expedient

The statement also discusses the use of net asset value (NAV) as a practical expedient under ASC 820, reminding registrants that it may be used only when specified conditions are met and may not be appropriate when a sale at an amount different from NAV is probable. The Statement noted that “The staff encourages management to treat this assessment as an iterative, evidence-based process: identify relevant information (for example, investee-level policies and controls, changes in market conditions, secondary-market data), evaluate its implications for the conditions required to apply the practical expedient, and document the basis for management’s conclusions.”

Why Private Fund Managers and Auditors May Care

Although the statement is directed at registrants, including “registered closed-end funds, interval funds, tender offer funds, business development companies and private funds registered under the Securities Exchange Act of 1934”, the Statement expressly noted that “these issues are relevant for auditors who are responsible for evaluating management’s judgments and the sufficiency of a registrant’s disclosures.” The valuation, calibration, and disclosure considerations discussed may therefore be of interest to private fund managers and auditors involved in estimating and auditing fair value measurements for illiquid investments.

The Statement closes with the following summary message relating to the valuation and disclosure topics discussed: “[r]obust policies and procedures, paired with material disclosure, help investors understand an entity’s fair value process, the judgments involved, and the risks associated with private assets.”