SEC Staff Statement on Fair Value Measurement and Disclosure Considerations for Private Assets

On September 28, 2026, Kurt Hohl, the Chief Accountant and, Brian Daly, the Director of the Division of Investment Management (the “Division”) of the U.S. Securities and Exchange Commission (“SEC”) issued a joint statement (the “Joint Statement”) providing reminders from the staff of the SEC’s Office of the Chief Accountant and of the Division (together, the “Staff”) regarding fair value measurement and disclosure issues relating to private assets, with a focus on private credit. The Joint Statement revisits the areas of significant judgment that arise under FASB ASC Topic 820, Fair Value Measurement, as well as the Investment Company Act of 1940 (the “1940 Act”), and underscores the need for disclosure that is both targeted and transparent. The Staff directs its reminders not only to registered funds and business development companies, but to every registrant with exposure to private credit assets.

Why Private Credit

The Staff reports that private credit investments, including for registered closed-end funds, interval funds, tender offer funds, business development companies and private funds registered under the Securities Exchange Act of 1934, have grown significantly over the past five years,¹ and notes that, because these assets are typically illiquid, individually negotiated loans that do not trade on established secondary markets, they generally lack readily available quoted prices and must frequently be valued using significant unobservable inputs—measurements that are accordingly categorized as Level 3 within the fair value hierarchy established by FASB ASC Topic 820. Because measuring these assets under FASB ASC Topic 820 depends heavily on the registrant’s own choice of technique, inputs and assumption weightings, the Staff treats robust valuation policies and procedures, and disclosure that explains those judgments to investors, as essential.

Valuation Reminders

• Information quality and management’s responsibility: Because private credit arrangements are individually negotiated, the quantity, quality, and frequency of borrower reporting varies with the covenants and reporting requirements of each deal. The Staff cautions that gaps or delays in that information do not relieve management of its obligation to estimate fair value, and advises management to assess whether an arrangement’s reporting provisions, including the cadence at which information is furnished, are sufficient to support ongoing monitoring and financial reporting.
• The market-participant perspective: FASB ASC Topic 820 requires management to account for the characteristics a market participant would consider in pricing the asset at the measurement date, so internal expectations bear on the measurement only insofar as they align with that perspective. Management commonly starts from borrower-specific information obtained through its direct relationship and monitoring (payment history, covenant compliance and operating metrics), but must supplement or adjust its own data where it diverges from reasonably available information a market participant would use. In practice, that may require attention to prevailing credit spreads, liquidity conditions, and the return a market participant would demand for the risks the investment carries.
• The importance of calibration: Where the transaction price at initial recognition represents fair value, it serves as a critical reference point for later measurements, and where subsequent measurement relies on unobservable inputs, FASB ASC Topic 820 requires management to calibrate its valuation technique so that, at initial recognition, the result of the valuation technique equals the transaction price. By forcing the valuation technique, or model, to produce the transaction price at inception, the standard helps to ensure that the model’s assumptions and inputs start from a defensible baseline; similar to setting a scale to zero before weighing something. Subsequent movements in fair value should then follow from changes in assumptions or techniques consistent with a market participant’s perspective. The Staff has observed that robust calibration—including periodic reassessment of model outputs against available market information such as comparable transactions, public market equivalents, secondary market indications, and relevant credit indices—may be an important element of a well-functioning valuation process.

Disclosure Reminders

• Fair value measurement disclosures: For recurring Level 3 measurements, FASB ASC Topic 820 requires quantitative disclosure about the significant unobservable inputs used in the valuation. Where material, registrants must convey the valuation technique or techniques applied to private credit assets, the inputs significant to the measurement (discount rates, credit spreads or comparable transaction data among them) and how changes in those inputs could yield a significantly different fair value at the reporting date. The Staff cautions that disclosure which is untailored, cast in boilerplate or presented on an overly aggregated basis may leave investors without sufficient context on the techniques and inputs used, and emphasizes entity-specific disclosure that allows investors to evaluate the underlying judgments and the measurement uncertainty in reported amounts.
• Transparency on portfolio risk characteristics and performance: US GAAP and Regulation S-X already require disclosure of investment types, industry and geographic exposure and asset characteristics such as interest rates, maturity dates, income-producing status and payment-in-kind (“PIK”) interest status. The Staff notes that portfolio-level statistics can mask modifications, restructurings, extensions, and non-accrual periods, and indicates that the criteria management applies in classifying an investment as non-accrual, in determining when interest accrual stops and in accounting for interest already accrued but uncollected may be material to investors. The Staff likewise points to clear disclosure of how and when PIK interest is recognized, whether it is a growing share of reported income and what its prevalence may signal about borrower financial condition or credit risk, so that investors can tell which registrants earn cash income and which report capitalized interest that deepens their exposure to the borrower.
• Use of NAV as a “practical expedient”: US GAAP offers a practical expedient that permits management to estimate the fair value of an investment in another entity using the net asset value (“NAV”) reported by that investee. The practical expedient is available only where the investment has no readily determinable fair value and is an interest in an investment company within the scope of FASB ASC Topic 946, Financial Services – Investment Companies. To use the reported NAV without adjustment, it must be as of the measurement date and calculated consistently with FASB ASC Topic 946, and the practical expedient is unavailable where a sale at some other price is probable. The Staff believes that it is important to remember that utilizing NAV as a practical expedient may result in a measurement that differs from the fair value that might be realized in a transaction between market participants on the measurement date. The Staff makes two additional points:
  • Even when the criteria required to apply the practical expedient are met, the practical expedient application is optional, on an investment-by-investment basis and management remains responsible for concluding that the investment meets the criteria required to apply the practical expedient; and
  • When assessing whether the reported NAV is calculated in a manner consistent with the measurement principles in FASB ASC Topic 946, the evaluation is often based on information provided by the investee fund manager during the registrant’s initial due diligence and ongoing monitoring. However, the Staff believes that registrants should consider reasonably available information, which may evolve as the secondary market for private fund interests continues to grow. The Staff emphasized that this assessment (i.e., whether an investee fund’s reported NAV is calculated in a manner consistent with the measurement principles in FASB ASC Topic 946) requires professional judgment, and that all reasonably available information should be considered. The Staff encourages management to treat the assessment as an “iterative, evidence-based process: identify relevant information (e.g., 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.”²

Conclusion

The theme running through each of these reminders is that disciplined valuation policies and procedures and material, context-specific disclosure work in tandem to give investors an understanding of an entity’s fair value process, the judgments it entails, and the risks associated with private assets. The Staff also highlighted that management, boards, valuation designees, and auditors each serve important roles to ensure that financial reporting meets the rigorous standards and investor focus of existing legal and regulatory frameworks.

Although focused on private credit, the Joint Statement provides a useful road map for registrants to consider when valuing all types of private assets and other fair valued investments— and, quite possibly, for examination staff when evaluating whether registrants are meeting those standards. Additionally, the Staff’s emphasis on disclosure materiality serves as an important warning to registrants to critically evaluate the rigor of their fair value methodology and the adequacy of their related risk disclosures.

 

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¹ Private credit investment within registered fund portfolios grew nearly 60%, from $170 billion in December 2020 to $270 billion in December 2025. See SEC, Investment Management Data, Registered Fund Statistics Supporting Data (XLSX).

² The Staff also commented on the role of auditors in the fair valuation reporting process.