CVCA issues guidelines

The Canada’s Venture Capital Association has released a set of valuation guidelines governing private equity and venture capital investments.

Amidst the global guidelines hullabaloo surrounding reporting standards, Canada’s Venture Capital Association (CVCA) last week released guidelines meant to govern the valuation of unrealised venture capital and private equity investments.

The guidelines were prepared in conjunction with Réseau Capital, an association of key private equity and venture capital players in Québec that provides services and activities meant to foster the growth of the industry.

In the statement, the CVCA said it would subsequently release all future industry performance data based on these guidelines. In addition, the CVCA states that it remains committed to working with other associations across the globe to develop a global standard.

Indeed, developing international accounting standards has recently become one of the more talked about topics in the industry. In March, the National Venture Capital Association (NVCA) refused to endorse the valuation standards proposed in December by the US-based Private Equity Industry Guidelines Group, though the NVCA did recommend the guidelines as a model and called for any valuation methods to adhere to Generally Accepted Accounting Principles (GAAP).

The issuance of valuation guidelines in the US, like in Canada, is seen as a way to get the US private equity industry in line with Europe. Last year, the British Venture Capital Association (BVCA) also issued guidelines placing emphasis on ‘fair value’ as the appropriate valuation methodology as opposed to holding companies at cost. The European Private Equity & Venture Capital Association (EVCA), having previously recommended valuing at cost, is expected to follow this lead when updating its 2001 guidelines later this year.