Accounting for Private Equity Funds
Accounting for private equity funds should accommodate privately held companies, keeping in mind that that private equity funds are not traded publicly, and private equity investments are usually made directly from high net-worth sources. Thus, accounting and tax planning follow the same tone.
A private equity CPA should work within the standards issued by the FASB and the IASP. Some accounting standards were not formed with private equity entities in mind, so private equity tax planning and private equity fund accounting must be adjusted to clearly outline the financial situation and operation of the private equity fund.
Private equity bookkeeping, especially the preparation of financial statements, should clearly reflect the terms that the equity fund has with the different businesses or individuals that have invested. The private equity fund’s activities and investors should also be outlined in financial statements.
Private Equity Accounting Guide
Private equity funds under the US GAAP follow this framework laid out by the American Institute of Certified Public Accountants that includes an Audit and Accounting Guide. According to the guide, private equity bookkeeping should consist of:
- Cash flow statements
- Schedule of investments
- Statement of assets and liabilities
- Statement of operations
- Separate listings of financial highlights
- Notes on the financial statements