RT Journal Article SR Electronic T1 The Implications of Fair Value Accounting Standards
on Private Equity Buyout Returns JF The Journal of Private Equity FD Institutional Investor Journals SP 55 OP 78 DO 10.3905/jpe.2012.15.4.055 VO 15 IS 4 A1 Adrian Oberli YR 2012 UL https://pm-research.com/content/15/4/55.abstract AB Since the late 1970s, private equity has become an increasingly important financial asset class with significant economic impact. The article addresses private equity characteristics, delineates how fair value accounting practices entered the industry, and empirically examines the implications of fair value accounting practices on LBO returns. Nevertheless, the question of how to account for private equity funds’ unrealized investments remains highly controversial. This article empirically examines whether fair value accounting provides more accurate valuations and enhances comparability with public databases. The results show that time lags in private equity reporting have to be considered in return attribution and that leading buyout return indices have become more correlated since 2000 with the use of fair value accounting.TOPICS: Private equity, security analysis and valuation, statistical methods, volatility measures