IPEV Valuation guidelines

The IPEV Guidelines (International Private Equity and Venture Capital Valuation Guidelines) are the international standard of best practice for measuring unquoted investments at fair value. For private equity and venture capital funds and for Polish alternative investment companies (ASI), they are the key point of reference – both when valuing the portfolio and when the valuation is reviewed by a statutory auditor.

In December 2025 the IPEV Board published a new edition of the Guidelines, which supersedes the 2022 version and applies to reporting periods beginning on or after 1 April 2026. This means that valuations of investments as at 31 December 2026 should already refer to the 2025 edition.

This article opens our series on valuation methods under IPEV. Here we cover the fundamentals – the concept of fair value, the valuation principles and a map of the available techniques. Each method will be discussed in a separate post.

What are the IPEV Valuation Guidelines?

The IPEV Guidelines are a set of recommendations on valuing private capital investments – that is, equity and debt instruments of companies not listed on a stock exchange: from seed projects and start-ups, through management buyouts and growth capital, to infrastructure, private credit and interests in other funds.

The document consists of three main parts: the Guidelines with explanatory comments (Section I), additional guidance for specific situations (Section II – including insider funding rounds, bridge financing, venture debt, convertible instruments and ESG) and defined terms (Section III). The Guidelines have been drafted so that a valuation prepared in line with them is also compliant with IFRS 13 and US ASC 820.

Do the IPEV Guidelines apply in Poland?

The IPEV Guidelines are not legislation – they state themselves that, in the event of a conflict, laws and accounting standards take precedence. In Polish practice, however, they are a widely accepted best practice relied upon by fund managers, valuers and statutory auditors.

The basis for valuing the investments of an ASI is Polish accounting law. The Accounting Act defines fair value (Article 28(6)) as the amount for which an asset could be exchanged between interested, knowledgeable and unrelated parties. This is precisely a willing buyer – willing seller definition, for which the IPEV Guidelines expressly state that they may be relevant. In addition, from the 2025 financial statements onwards, the Regulation of the Minister of Finance of 17 November 2024 on the recognition, measurement, disclosure and presentation of financial instruments (Journal of Laws 2024, item 1750) applies. It introduced a three-level fair value hierarchy and the concept of an active market. Interests in portfolio companies are usually Level 3 – a valuation based on unobservable inputs, where the IPEV methodology is particularly helpful.

ASI managers operating under a licence from the Polish Financial Supervision Authority (KNF) must also comply with Article 70h of the Act on Investment Funds (valuation at least once a year, written valuation policies and procedures in line with Delegated Regulation (EU) No 231/2013). Managers entered in the KNF register are exempt from that provision (Article 70zb(4)) – but this does not release them from measuring investments at fair value for the purposes of the financial statements, which are subject to a mandatory audit.

Fair value – the foundation of the IPEV Guidelines

Under IPEV, fair value is the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. This definition has consequences that are among the most debated in practice:

• A hypothetical sale at the measurement date – the valuer assumes the investment is realised at the measurement date, irrespective of whether the company is prepared for sale or whether its shareholders intend to sell. The argument “we are not selling, so we keep it at cost” finds no support in IPEV.
• The market participant perspective – what matters are the assumptions a typical buyer would make, not the intentions or expectations of the fund manager.
• Unit of account – it must be determined what exactly is being valued: the whole holding in a company (e.g. series A, B and C together) or individual instruments separately.
• Consistency – the same techniques are applied from period to period and to similar investments, unless a change in circumstances justifies a different approach.

Valuation principles under IPEV

Valuation at each measurement date

The fair value of each investment is assessed at each measurement date. A valuation repeated without analysis – with the same list and the same amounts as a year earlier – does not meet this requirement.

Allocating enterprise value

In private equity, value is usually realised through the sale of the entire company. That is why the starting point is most often the enterprise value, which is adjusted for surplus assets and liabilities, reduced by instruments ranking ahead of the fund’s holding, adjusted for dilution, and then apportioned between the instruments according to their ranking (the so-called waterfall).

Prudent judgement – without excessive caution

The valuer should exercise care, but IPEV explicitly warns against excessive caution. The valuer considers information that is known or knowable at the measurement date. The valuation is meant to be unbiased – reflecting both decreases and increases in value.

Calibration

If the entry price represented fair value, the technique to be used in subsequent periods is “calibrated” using market inputs as at the investment date – so that it reproduces the entry price. At subsequent measurement dates the same model is fed with current market data.

Backtesting

After an exit, the sale price is compared with the most recent valuation to analyse whether the information available at the measurement date was properly taken into account. It is a tool for assessing the quality of the whole valuation process – for the statutory auditor as well.

Valuation techniques under IPEV – a map of the series

IPEV groups valuation techniques into three approaches. The valuer selects one or more techniques most appropriate for a given investment – taking into account, among other things, the company’s stage of development, its ability to generate earnings, and the quality and availability of data.

An important point concerns the price of a recent investment. IPEV does not treat it as a standalone valuation technique. The price from a recent orderly transaction may represent fair value at the transaction date, but at subsequent measurement dates it is merely an input for calibration – and is not automatically deemed to be fair value. In the following articles we will discuss each technique: when to use it, what data it requires and what we look at in an audit.

What does the 2025 edition of IPEV change?

The Guidelines themselves remained virtually unchanged (only Guideline 1.4 was clarified). The explanatory comments and Section II, however, have been expanded:

• it has been reaffirmed that the price of a recent investment is not automatically fair value, and that fair value will generally change from one measurement date to the next;
• extensive guidance has been added on complex capital structures and liquidation preferences – key for venture capital-backed companies;
• the guidance on valuing debt and convertible instruments has been expanded, including venture debt, SAFEs and convertible loan notes (new section 5.20);
• guidance has been added for situations with limited information on portfolio companies (5.18) and for more frequent valuations (5.19);
• the impact of sustainability (ESG) factors and artificial intelligence is discussed – AI tools can support valuation, but they do not replace judgement, and the valuer remains fully accountable for the outcome.

IPEV valuation in the audit of financial statements

In the audit of an ASI or a fund, the valuation of portfolio companies is usually the most significant risk area. IPEV identifies the elements of a robust valuation process: a written valuation policy, documentation of assumptions and significant judgements, independent review (a valuation committee or an external adviser) and backtesting. In practice, we most often come across:

• investments held at acquisition cost for years without analysing events after the transaction;
• a “cost or zero” method that makes it impossible to recognise any increase in value;
• no calibration and no allocation of enterprise value where preferred share classes exist;
• references to an outdated edition of IPEV or to the repealed regulation on financial instruments;
• a valuation that does not cover all portfolio positions, e.g. loans granted to portfolio companies.

Frequently asked questions (FAQ)

What is IPEV?

IPEV (International Private Equity and Venture Capital Valuation Guidelines) are international guidelines on measuring unquoted investments at fair value, developed by the IPEV Board and endorsed by industry associations around the world. The current edition dates from December 2025.

Does a Polish ASI have to apply the IPEV Guidelines?

There is no statutory obligation to do so. An ASI must, however, measure its investments at fair value in accordance with Polish accounting law, and the IPEV Guidelines are a widely applied best practice that allows this value to be determined consistently and in a verifiable way.

Is the price of the latest funding round fair value?

At the transaction date – usually yes, provided it was an orderly transaction involving independent investors. At subsequent measurement dates, the price of a recent investment is only a starting point and an input for calibration. It must be assessed whether any events since the transaction have changed the value of the company.

When does IPEV 2025 apply?

The 2025 edition applies to reporting periods beginning on or after 1 April 2026; early adoption is encouraged. For an ASI whose financial year is the calendar year, this in practice means the valuation as at 31 December 2026.

Which valuation methods does IPEV provide for?

The market approach (multiples, industry benchmarks, market prices), the income approach (discounted cash flows of the company or from the investment) and the replacement cost approach (net assets). In addition, there is calibration to the price of a recent investment and separate rules for valuing fund interests based on NAV.

Biegly.pl specialises in auditing the financial statements of private equity and venture capital funds, ASI and ZASI, including the review of portfolio company valuations under the IPEV Guidelines. If you are preparing a valuation policy or a year-end portfolio valuation – contact us.