Abstract

Fair value measurement is crucial for accurately representing the value of investment funds in the financial statements. The valuation of investment funds whether mutual funds, private equity funds, or hedge funds, depends on various methods that ensure the accurate and fair presentation of the assets within these funds. Fair value accounting is especially relevant in determining mutual funds; Net Asset Value (NAV), assessing illiquid assets; value in private equity, and valuing complex portfolios in hedge funds. The International Financial Reporting Standards (IFRS 13) and the Indian Accounting Standards (Ind AS 113) outline specific principles for determining fair value, emphasizing the importance of market-based, income- based, and cost-based approaches. However, challenges arise when market prices are unavailable, assets are illiquid, or subjective judgment is involved. This research paper explores the primary methods used to determine fair value in investment funds, comparing the global and Indian regulatory frameworks. Through case studies, the paper highlights the challenges fund managers and auditors face in applying these methods. Furthermore, it examines the role of auditors in ensuring the integrity of fair value estimates and the regulatory oversight that governs fair value determination practices. By analyzing real-world examples, this paper provides insights into the practical applications and limitations of fair value determination, offering recommendations for improving valuation practices in the industry.

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