---
title: "What Is ASC 820?"
term: "ASC 820"
description: "ASC 820 is the US accounting standard that defines fair value measurement — how companies and funds mark investments and financial instruments to market when reporting under GAAP. Venture funds use it to value portfolio holdings on quarterly financial statements."
date: 2026-07-25T00:00:00.000Z
updated: 2026-07-25T00:00:00.000Z
topics: ["venture-capital"]
source: https://venturecapitaltracker.com/glossary/asc-820
---

# What Is ASC 820?

> ASC 820 is the US accounting standard that defines fair value measurement — how companies and funds mark investments and financial instruments to market when reporting under GAAP. Venture funds use it to value portfolio holdings on quarterly financial statements.

**ASC 820** is the Financial Accounting Standards Board guidance on fair value measurement for entities reporting under US Generally Accepted Accounting Principles (GAAP). In venture capital, it governs how fund auditors value illiquid startup stakes each quarter.

## How it works

Fair value under ASC 820 is the price that would be received to sell an asset in an orderly transaction between market participants. The standard introduces a three-level hierarchy for inputs:

- **Level 1:** Observable quoted prices in active markets (rare for private startup equity).
- **Level 2:** Observable inputs other than quoted prices — for example, recent secondary trades in the same company.
- **Level 3:** Unobservable inputs — models using revenue multiples, comparable rounds, or scenario analysis.

Most VC holdings sit in Level 3. After a Series B, the fund often marks the position near the round price until a material event — new financing, impairment indicators, or a strategic sale — triggers reassessment. Calibrating to the latest round is common but not automatic if terms include heavy structure or the company underperforms.

Portfolio company CFOs encounter ASC 820 when marking warrants, complex derivatives, or contingent consideration from acquisitions — not just when raising from funds.

## Why it matters

- **Founders:** Your quarterly metrics and financing timeline affect your investors' reported NAV. Surprises in board meetings sometimes trace back to auditor-driven mark adjustments.
- **Investors (GPs/LPs):** Consistent ASC 820 policies make fund performance comparable across vintages. Aggressive Level 3 assumptions draw audit scrutiny; overly conservative marks depress IRR until a realization event.
- **Operators:** Finance teams supporting fund administration coordinate valuation memos with auditors each quarter.

## Common mistake

Assuming the last round price is the ASC 820 mark forever. Auditors expect ongoing calibration. A flat inside round with tougher terms or missed milestones can support a lower fair value even without a public "down round" headline.

## Related ideas

409A valuations (tax, not GAAP fund reporting), NAV, mark-to-market, and [/glossary/aum](/glossary/aum) reporting on fund financial statements.

## FAQ

### What is ASC 820 in simple terms?

ASC 820 is the rulebook for how to measure 'fair value' in US GAAP financial statements. It tells preparers what inputs to use — quoted prices, recent transactions, or models — and how to rank the reliability of those inputs.

### Why does ASC 820 matter?

VC funds report NAV to LPs using fair value marks governed by ASC 820. A startup's last round price often anchors the mark, but down rounds, flat extensions, and secondary sales can force write-downs. Founders should expect mark-to-market discipline after investment.


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Source: https://venturecapitaltracker.com/glossary/asc-820