409A vs IPEV vs IFRS 13
409A vs IPEV vs IFRS 13 — what each framework governs, when each applies, and how VC funds reconcile the three for reporting, options, and audit.
Three valuation frameworks govern most of what happens inside a VC fund's reporting cycle and a private company's option pricing. 409A is a US tax-code valuation supporting option strike prices under IRC §409A. IPEV is a global fund-reporting guideline used by PE and VC managers to value portfolio holdings. IFRS 13 is the global accounting standard defining fair value and its measurement framework (with ASC 820 as the US GAAP mirror). The three operate at different levels — investee tax compliance, fund NAV, and consolidated accounting — and a single transaction may pass through all three in sequence.
| Criteria | 409A (US tax-code valuation) | IPEV Guidelines and IFRS 13 Fair Value |
|---|---|---|
| Type of standard | US tax-code valuation (IRC §409A) | IPEV: industry guideline (IPEV board). IFRS 13: accounting standard (IASB), with ASC 820 mirror under US GAAP |
| Jurisdiction | United States | Global — IPEV applies wherever PE/VC funds operate; IFRS 13 applies wherever IFRS reporting applies |
| Primary user | US private companies granting stock options | IPEV: PE/VC fund managers for LP reporting. IFRS 13: IFRS-reporting entities, including funds |
| Subject of valuation | Common stock of a single US private company | IPEV: individual portfolio holdings within a fund. IFRS 13: any asset or liability measured at fair value under another IFRS |
| Purpose | Set option strike price to obtain §409A safe-harbour protection | IPEV: determine fair value of portfolio holdings for NAV. IFRS 13: define and measure fair value across accounting standards |
| Frequency | At least every 12 months or on material event | IPEV: each reporting period (typically quarterly). IFRS 13: each measurement date under the relevant IFRS |
| Measurement basis | Fair market value (US tax-code definition) | IPEV: fair value aligned to IFRS 13 / ASC 820. IFRS 13: exit price, market-participant view |
| Typical methods | Option Pricing Method (OPM), PWERM, hybrid; income, market, asset approaches | IPEV: five investment-level techniques (recent transaction, multiples, net assets, DCF, industry benchmarks). IFRS 13: three approaches (market, income, cost) |
| Hierarchy | Not explicit — safe-harbour framework | IFRS 13: three-level hierarchy (Level 1 / 2 / 3). IPEV: defers to IFRS 13 / ASC 820 for hierarchy classification |
| Safe harbour available? | Yes — independent qualified appraiser within 12 months | No — IPEV is guideline, not law; IFRS 13 is an accounting standard |
| Audit focus | IRS challenge defensibility — methodology, comparables, discounts | IPEV: technique justification and scenario weighting. IFRS 13: Level 3 disclosure, sensitivities, reconciliation |
| Disclosure obligation | Internal to company plus IRS on challenge | IPEV: LP-facing fund reports. IFRS 13: public-facing financial-statement disclosure |
| Where the three intersect | Investee commissions 409A; fund uses IPEV to value its position; fund's auditor applies IFRS 13 to fund disclosures | All three engaged across the lifecycle of an IFRS-reporting VC fund's US-based portfolio company |
When to Use Each Approach
409A (US tax-code valuation)
- Setting option strike prices for US private-company employee plans
- Tender offers, secondary sales, or other US equity-compensation events
- M&A diligence on US private companies — buyer-side HR review
- Late-stage US private companies preparing for IPO option grants
IPEV Guidelines and IFRS 13 Fair Value
- Fund managers running quarterly NAV reporting under IPEV
- IFRS-reporting entities measuring private investments at fair value
- LP-facing portfolio fair-value reporting with comparable methodology
- Audit defensibility of Level 3 inputs and sensitivity disclosures
Our Verdict
409A, IPEV, and IFRS 13 are not alternatives — they are different lenses on the same private-company value question, applied at different organisational levels. A single transaction passes through all three: 409A at the investee for option pricing, IPEV at the fund for portfolio NAV, and IFRS 13 at the fund's auditor for disclosure. Each carries its own documentation and disclosure obligations.
Related Glossary Terms
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