Financial Reporting

A January Round, a December 31 Mark: What a Fund Does With Information That Arrives Late

A fund controller's guide to ASC 855 and ASC 820: how a January down round, a lost customer and an acquisition offer change the December 31 mark, or the notes.

By 409.AI Team - 2026-10-12

# A January Round, a December 31 Mark: What a Fund Does With Information That Arrives Late

If you are the controller of a venture fund, you will probably get a call in January from a portfolio company that just closed a round. The audit fieldwork has not started, the December 31 marks are drafted, and the new price is either well above or well below what you carried. The question is what you do with it.

The answer is not "always update" and it is not "never update." It turns on two questions from ASC 855 on subsequent events, applied to a fair value measurement under ASC 820. This post walks both questions through three common January events, so you can see where the year-end mark moves, where it does not, and what ends up in the notes instead.

Why the measurement date is fixed

ASC 820 defines fair value as the price market participants would pay on the measurement date. For a fund with a calendar year, that date is December 31. Everything you know afterwards is information about the past, and the only reason to use it is that it tells you something about December 31.

The Deloitte roadmap on [fair value measurements](https://dart.deloitte.com/USDART/home/codification/broad-transactions/asc820-10/roadmap-fair-value-measurements-disclosures/chapter-10-subsequent-measurement/10-2-definition-fair-value) puts the principle plainly: information obtained after the measurement date is relevant only if it is evidence of conditions that existed at that date. You still have to ask what market participants would have known then.

If you have not set a position on this in writing, your [valuation policy](https://www.409.ai/articles/fund-valuation-policy-asc-820-audit-sec-exam) is the place to do it before January, not during it.

The two questions

ASC 855 sorts subsequent events into two groups. A recognized event gives additional evidence about conditions that existed at the balance sheet date. A nonrecognized event gives evidence about conditions that did not exist then. Financial statements are adjusted only for the first group. For the second, you evaluate whether the disclosures are complete.

Applied to a mark, that becomes two questions.

Question 1: Did the condition exist on December 31? If the new information evidences something that was not true on December 31, it is a nonrecognized subsequent event. The mark stays where it was. If the event is significant, the notes may need to describe it (ASC 855-10-50-2 and 50-3).

Question 2: Would market participants have known it on December 31? If a buyer doing usual and customary due diligence on that date would have had the information, you use it as an input. If the information only resolves an uncertainty that already existed, you do not plug in the outcome as if it had been certain. Under ASU 2012-07, as the Deloitte roadmap summarizes it, uncertainties resolved after the balance sheet date should not be built into the measurement with certainty unless market participants would have assumed that outcome. The mark reflects the risk that existed, not the result that followed.

Run them in order, and run both on every event. One event can pass the first question and still fail the second.

Event 1: A down round closes on January 14

Your fund holds a Series B position in a software company, carried at $20 million on December 31. On January 14, the company closes a Series C at a price that implies your position is worth $14 million.

Start with the transaction itself. It is an arm's-length round with new investors, and it is evidence you should weigh. The Deloitte roadmap's example of a subsequent transaction in an investee's equity lists what drives the weight: whether significant events happened between the measurement date and the transaction, whether the transaction was orderly rather than distressed, and how far it sits from the measurement date.

Two weeks is close. But "close" does not settle Question 2. Ask what was true on December 31. Suppose the term sheet was negotiated in November and December, the runway was shrinking, and the lead investor's diligence was underway. A buyer doing diligence on December 31 would have seen a company already out in the market for a new round. Those facts were present, so the round is evidence of the December 31 value and should carry real weight, and it may also be a good point to calibrate your model to.

What would reduce the weight? Something that changed between December 31 and January 14. If a key customer signed or left on January 8 and the new price reflects that, strip its effect out, because that condition did not exist at year-end.

The practical result: the year-end mark moves toward the January price, by an amount you can defend, and the memo for your auditor records what you included and what you set aside.

Event 2: A customer is lost on January 9

Same fund, different company. On January 9, the largest customer, 40% of revenue, gives notice it is not renewing. Your December 31 mark was built on a revenue multiple applied to a forecast that assumed the renewal.

Question 1 first. Did the condition exist on December 31? A customer deciding in January not to renew might have been unhappy for months. The contract may have been up for renewal on December 31. If the relationship was visibly strained before year-end, the loss resolves an uncertainty that already existed. If the customer was healthy at year-end and the cause is a new development, such as an acquisition of the customer on January 5, that condition did not exist at year-end.

Then Question 2, which matters for the first scenario. Even if the uncertainty existed, do not mark the company as though the loss had been certain on December 31. A market participant on that date would have priced the risk that the renewal fails, with a probability reflecting what was knowable. The January outcome informs that probability; it does not replace it.

So the year-end mark likely drops, but by less than the full effect of losing the customer. If the loss came from a development after year-end, the mark does not move and the event goes to the subsequent-events note if it is material. This is the hardest of the three to document, and the one auditors ask about most. Write down what the company's relationship with the customer looked like on December 31, with emails or renewal status as support.

Event 3: An acquisition offer arrives on January 20

A strategic buyer sends an unsolicited offer for a portfolio company at a price 60% above your December 31 mark. The board has not accepted it.

An unaccepted offer is not a transaction. It tells you a buyer exists and how they think about the company, but it is not a price at which anything traded. Ask Question 1: did the interest exist on December 31? If the buyer had been circling since the fall and the company's strategic position was known, the offer is evidence of a condition that existed, and you can weigh it as an indicator of value, with a discount for the chance the deal does not close. If the buyer appeared because of news after year-end, such as a product launch on January 12, the condition did not exist.

In neither case does the mark jump to the offer price. An offer carries deal risk, and a buyer's number is a ceiling for negotiation, not a clearing price. If the deal closes in February, you disclose it as a nonrecognized subsequent event if it is material, and the March 31 mark picks it up.

How the three outcomes differ

The same January calendar produces three different treatments:

The down round is evidence of December 31 conditions, so it moves the year-end mark by an amount tied to its distance and the events in between.
The lost customer moves the year-end mark only for the portion of the risk that existed on December 31, weighted by what was knowable.
The offer moves the year-end mark little or not at all, and falls into the notes if it is material.

The pattern to take from this: a later price is evidence, not a replacement for the measurement. Your job is to say how much it tells you about December 31 and why.

What to put in writing before fieldwork

Auditors will test your treatment of anything dated after year-end, so assemble the file while the facts are fresh.

For each portfolio company with a post-year-end event, record the date you learned of it, what condition it evidences, whether that condition existed on December 31, and what a buyer would have known. Record the weight you gave a later transaction and the events between the two dates. Then note which items went to disclosure instead of the mark.

Tie it into the rest of the package. The [Level 3 footnote](https://www.409.ai/articles/asc-820-level-3-footnote-private-fund-asu-2018-13-nonpublic) describes the inputs you used, and a late round that shaped them belongs there. If you value positions using a [calibrated model](https://www.409.ai/articles/sec-staff-statement-private-asset-fair-value-calibration-nav), a January price is a data point to weigh against your December 31 calibration, not a replacement for it. And any change to a mark flows into [carried interest accrual](https://www.409.ai/articles/carried-interest-accrual-hypothetical-liquidation-fund-marks), so tell the GP's team early.

Mind the calendar too. The [custody rule's 120-day clock](https://www.409.ai/articles/custody-rule-120-day-audit-deadline-fund-year-end-marks) leaves little room for a second round of marks, so decide the treatment of January events by the end of the first week of fieldwork, not the last.

The takeaway

Before the first January round lands, write a one-page rule for your fund: what counts as evidence of December 31, how you weight a transaction by distance and intervening events, and where unaccepted offers and unresolved risks go. Then apply it the same way to the up rounds as to the down rounds. An auditor who sees one treatment applied to both directions will spend less time on your marks than one who sees it applied only when the news is bad.

If your fund needs independent support on year-end Level 3 marks, see [409.AI's ASC 820 portfolio valuation](https://www.409.ai/products/asc-820).