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Fund Compliance

what are level 1, 2, and 3 investments with regards to valuation policy?

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Community Member
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Nov 28, 2023
"The Valuation Policy has been prepared in the context of FASB Accounting Standards Codification Topic 820 (“ASC 820”), “Fair Value Measurements and Disclosures,” which has been adopted by General Partner for the purposes of valuing the Portfolio Investments of the Fund.  ASC 820 requires that investments be classified as Level 1, 2, or 3 investments. It is anticipated that Level 3 investments will comprise the majority of the Fund’s Portfolio Investments. This Valuation Policy shall be reviewed on an annual basis."
1 answer
Accepted Answer
Nov 28, 2023
Valuation policies take various approaches. Assuming that you are referring to the VC Lab Valuation Policy, SAFE or a Convertible Note investments will held at cost on the fund's financials until there is a priced round. Upon a priced round, subsequent equity round valuations will be used to value the asset.

Below are the definitions of the Levels:

Level 1 investments are quoted prices (unadjusted) in Active Markets for assets or liabilities that the reporting entity has the ability to access at the valuation date.

Level 2 investments are inputs other than quoted prices included within Level 1 Inputs that are observable for the asset or liability, either directly or indirectly.

Level 3 investments are unobservable inputs for the asset or liability. Level 3 Inputs should be used only to the extent that Level 1 Inputs and Level 2 Inputs are not available. Level 3 Inputs may be relied upon when little to no market activity exists for a particular asset or liability.



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