The 2025 IPEV Valuation Guidelines, published in December 2025, introduce updated guidance that captures the latest developments in valuation methodologies, market dynamics, and stakeholder expectations. In our glossary below, we set out more detail on some of the key concepts.
In the know – Calibration
Calibration is required at each measurement date.
The 2025 IPEV Guidelines place emphasis on a reality sometimes reluctantly accepted by practitioners - fair value should evolve from one measurement date to another, because typically company performance and market conditions evolve. Assumptions to a valuation model which remain strictly unchanged over time, should be the exception.
What is calibration?
Put simply, the price of the initial investment is deemed fair value on the investment date, if it was an orderly transaction. Calibration validates that the valuation techniques using contemporaneous/recent market inputs will generate fair value at inception and, therefore, that the valuation techniques using updated market inputs as of each subsequent measurement date will generate fair value at each such date. As time passes, firms must assess whether changes in assumptions remain reasonable given evolving facts and circumstances. Calibration is also essential in the absence of new transactions, to explain valuation movements between Measurement Dates.
Mandated by IFRS, calibration is one of the most powerful concepts in the IPEV guidelines and plays a critical role throughout the investment lifecycle. In best practice examples a PE house will retain the historical assumptions to enable side-by-side comparisons. This ensures that quantitative valuation movement over time, together with points of difference assessment – support period-on-period movements with are transparent, defensible, and aligned with IPEV expectations.
What do the updated IPEV Guidelines say?
The updated 2025 IPEV guidelines explain calibration is most relevant when the measurement date is close to the transaction date. However, even if substantial time has passed, calibration is still required. The principle ensures application of assumptions to the valuation over time are carefully considered, reasonable and defensible.
IPEV 2025 reemphasis that practitioners start point at measurement date, shouldn’t be to select the public comps and apply a discount.
A calibration approach considers what was paid in the orderly transaction at the initial acquisition date, assess how the purchase multiple compares to those in the listed comparable basket – then at each subsequent measurement date considers movements in the public and arguments to performance of the portfolio company.
In the know – The hypothetical transaction
The concept of the “hypothetical transaction” occurring at measurement date has always been an important foundational principle in the IPEV guidelines.
There is one amended sentence in the main guidelines section. Section 1.4 of the 2025 Guidelines now state:-
"for Unquoted Investments, the measurement of Fair Value requires the Valuer to assume the Investment is realised or sold at the Measurement Date irrespective of whether or not the instrument or the Investee Company is prepared for sale or whether its shareholders intend to sell in the near future."
Fair value definition
“The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.”
In the know – Liquidation preference considerations
One of the major developments in the new guidelines, concerns the valuation of instruments with complex capital structure requiring a dedicated approach, beyond the “simple” methods that allocate enterprise value. The message is increasingly complex capital structures, must be appropriately addressed in the valuation.
Across PE and VC over the last few years we’ve seen an increase in the complexity of instruments held by the funds, especially as many early-stage companies are financed by combination of different classes of equity, which provide unique rights, privileges and preferences. Many come with options and warrants. We are also seeing an increase in venture debt and SAFE (Simple Agreement For Equity) and ASA (Advanced Subscription Agreements) notes.
Convertibles and other hybrid instruments are now covered in a new dedicated section in the updated IPEV 2025 guidelines. This new dedicated section covers instruments such as Venture Debt, SAFEs, and ASAs), which have become ubiquitous in private markets. The guidelines talk about several methods used in such cases, including scenario-based methods, option pricing and hybrid methods. It talks about several non-economic rights which may not be explicitly considered in any of the commonly used methods for valuing equity interests. However, these rights would be considered in assessing market participant expectations regarding expected exit scenarios and timing. The guidance also reiterates that some methods for valuing equity interests may appear more theoretical and complex - however a more complex or detailed method would not necessarily be superior to a simpler method if that truly captures market participant assumptions.
IPEV also sets out that the market practice is PE and VC investments routinely include a liquidation preference, regardless of whether it is anticipated that the downside protection will have an economic value. The guidelines note that particularly in the early stages of VC rounds, the liquidation preference is unlikely to have a direct economic value. IPEV further clarify that the intention of market participants is most important from a calibration perspective. The impact of liquidation preferences is included in the price paid; for example, a two-times liquidation preference that is embedded in the price paid is generally likely to be representative of fair value, as opposed to fair value being increased by two-times on day one, due to the mere existence of the liquidation feature.
In the know – Known and Knowable
A central principle to IPEV. But area that deceptively often requires thoughtful consideration from practitioners and application of judgement.
Nuanced matters need to be considered case by case, especially regarding treatment of data received in the subsequent event period. The additional 2025 guidance will support some of the challenges practitioners frequently encounter.
The exam question that practitioners need to consider is - does the data received indicate considerations that existed at the measurement date? And could this information be known and knowable?
If yes – it typically would be a situation that suggests valuation adjustment would be appropriate. However, care is needed.
Further it is not necessary to halt a valuation reporting process, waiting for coterminous audited data to arrive – utilising best available is satisfactory.
In the know – Transactions after the measurement date
While the updated IPEV guidelines still make clear that indicative offers may provide useful additional support for a valuation estimated by one of the Valuation Techniques but are generally insufficiently robust to be used in isolation – new guidance is given in respect of transactions after the Measurement Date.
The updated guidelines clarify that a transaction which is anticipated to sign or close after the Measurement Date may provide an indication of the Fair Value at the Measurement Date. Depending on the facts and circumstances uncertainties including but not limited to changes to the anticipated transaction price, the risk of failure to close, and the time to close the transaction, should be reflected when determining Fair Value at the Measurement Date. The proximity to the Measurement Date of a transaction closing or signing may provide information with respect to the judgements applied with respect to what was known or knowable at the Measurement Date.
In the know – Automated models and AI
The updated guidelines are clear that professional judgment remains central to valuations, technology augments it.
The IPEV Board, aligns with the IVSC Standards Review Board, and underlines that automated valuation models and AI are not substitutes for professional judgment or scepticism. However, when used appropriately, technology can significantly enhance valuation quality and efficiency. Human judgment is essential to ensure valuations are fit for purpose. AI and automation should support, not replace, valuation professionals.
