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The Role of the Actuarial Valuation Report in Plan Funding

Gfoa recommends that governments carefully review and understand their actuarial valuation report and use the information it contains to make policy decisions..

The actuarial valuation report has always played an important role as the basic source document for information regarding actuarially determined contributions and the funded status of pension and other post-employment benefit (OPEB) plans.[1] The actuarial valuation report, prepared in accordance with Actuarial Standards of Practice (ASOP), will soon come to play an even more critical role in the wake of the implementation of GASB Statement No. 68, Accounting and Financial Reporting for Pensions , because funding information for pensions will no longer automatically be provided in financial reports. That is, the actuarial valuation report will soon be the sole source of information for many financial decision makers desiring to make informed decisions about the funding of pension benefits.

GFOA recommends that state and local government finance officials and others with decision-making authority carefully review and understand their actuarial valuation report and use the information it contains to make policy decisions that ensure that pension benefits are funded in a sustainable manner, consistent with the pension funding guidelines developed by GFOA and the other major state and local government professional organizations.

Reviewing and Understanding the Valuation Report The purpose of an actuarial valuation is 1) to determine the amount of actuarially determined contributions (i.e., an amount that, if contributed consistently and combined with investment earnings, would be sufficient to pay promised benefits in full over the long-term) and 2) to measure the plan’s funding progress. Key items to consider in reviewing the valuation report include:

  • Actuarially Determined Contribution . The actuarially determined contribution represents the amount needed to fund benefits over time. If the contributions are not fully paid, interest accrues on the unpaid portion at the plan’s expected long-term rate of return.[2] Persistent underfunding will ultimately jeopardize the plan’s sustainability. The GFOA recommends that the full amount of the actuarially determined contribution be paid to the plan each year.
  • Liabilities, Assets, and Funded Ratio . The actuarial accrued liability (AAL) represents the present value of benefits earned, calculated using the plan’s actuarial cost method. The actuarial value of assets (AVA) reflects the financial resources available to liquidate the liability. The unfunded actuarial accrued liability (UAAL) is the difference between the AAL and the AVA. The funded ratio (AVA/AAL) reflects the extent to which accumulated plan assets are sufficient to pay future benefits. The GFOA recommends that the funding policy aim to achieve a funded ratio that approaches 100 percent, with asset smoothing and amortization methods consistent with the government’s funding policy and ASOP.
  • Actuarial Assumptions . Since the future is unknown, actuarial valuations must be based on assumptions.  For an actuarial valuation to be reliable, the assumptions used should reflect the best information available, which should be supported by rigorous discussion and analysis. Likewise, information concerning the demographic characteristics of the covered population needs to be current.
  • Multi-year information on the plan’s funding progress that includes the AAL, the AVA, the funded ratio, and the UAAL as a percentage of payroll, consistent with the government’s funding policy; and
  • Multi-year information on both actuarially determined contributions and actual amounts contributed (by definition, if actuarially determined annual required contributions are paid faithfully each year to the plan, the plan should accumulate sufficient resources over time to pay benefits, regardless of the actuarial cost method selected).

In both cases, the number of periods for which data are presented should be sufficient to allow for the meaningful analysis of trends (e.g., 6 to 10 years and longer if available).

  • Actuarial Comments . Actuarial Standards of Practice (ASOPs) require actuaries to make certain disclosures in their reports. These disclosures are commonly presented as comments intended to help users understand the report and include: 1) the report’s intended purpose; 2) cautions regarding risk and uncertainty; and 3) constraints regarding the use of the report for other than its intended purpose. In addition, if a prescribed assumption or method is used that the actuary believes is unreasonable or conflicts with the ASOPs, the actuary has a duty to disclose that fact in the report.[3]
  • Information Needed to Prepare Financial Reports . The actuarial report may also provide all of the information needed to prepare the government’s financial reports in conformity with generally accepted accounting principles (GAAP) or legal or contractual requirements.  This information may be provided as part of the valuation report or through a separate actuarial report.
  • Other information . An actuarial valuation report also may include: 1) projections of future contributions and funded status; 2) an analysis of the impact of potential changes in actuarial assumptions; and 3) the impact of economic volatility on the plan’s contributions and funded ratio.[4]

Recommendation: 

Using the Actuarial Report to Make Appropriate Decisions

The information contained in an actuarial report is complex and can be difficult to understand for those who are not accustomed to working with this kind of information. For this reason, simply providing a copy of the actuarial report to decision makers does not ensure that everyone has a full understanding of its short-term and long-term implications. In most governments, the finance officer is in the best position to communicate the contents of the actuarial report, as the finance officer is familiar with the nuances of the actuarial report and is also intimately familiar with the organization’s financial situation. Accordingly, the first step toward using an actuarial report to make appropriate decisions is for the finance officer to communicate the information the report contains to decision makers and the general public in a clear and understandable manner. Effective communication is especially important when changes to benefits are being considered.

To draw full benefit from the information contained in an actuarial report, the review of the information it contains must be followed by appropriate action steps:

  • Making Required Contributions . The key purpose of an actuarial valuation is to inform plan sponsors of the amount that needs to be contributed each year to adequately fund benefits. Consequently, the first action step is to take appropriate steps to ensure that actuarially determined contributions are faithfully paid to the plan each year.  If those contributions are not made, follow-up action should be taken to understand the underlying cause of the underfunding and to resolve it.
  • Assessing Funding Progress . Historical information should be used to assess funding progress (e.g., Is the plan’s funded ratio improving over time? Is the rate of improvement consistent with the employee’s funding policy?).
  • Mitigating Risks . Information from the actuarial valuation can help to uncover risk exposure related to the funding of benefits.  Decision makers should identify those risks and take appropriate and timely action to mitigate them.  For example, if the valuation shows a high degree of asset volatility, it may be prudent to lower that volatility through adjustments to asset allocations or by other means, such as examining the methodology used to determine the actuarial value of assets.  
  • Ensuring Reliable Data . For an actuarial valuation to be reliable, the underlying data must be reliable as well, including the demographic information related to plan members, the economic information related to investment returns and payroll growth, and the detailed descriptions of current benefits.  Employers should work closely with the actuary to ensure that reliable information is provided in a timely manner.
  • Validating Methods and Assumptions through Experience Studies . The reliability of an actuarial valuation also depends on the use of reasonable methods and assumptions.  Experience studies, performed no less frequently than every five years, can help to ensure the assumptions are in line with the plan’s demographic and economic experience, or can be used as a guide to make necessary changes. Likewise, a comprehensive audit of the plan’s actuarial valuations performed by an independent actuary at least once every five to eight years can be used to evaluate the appropriateness of the actuarial methods, assumptions, and their application.
  • GFOA’s Best Practice, Sustainable Funding Practices for Defined Benefit Pensions and Other Postemployment Benefits (OPEB) .
  • The long-term expected rate of return is significantly higher than the short-term rates used in operating funds.
  • Actuarial Standards Board, Actuarial Standards of Practice No. 41, Actuarial Communications , December 2010.
  • California Actuarial Advisory Panel, Model Disclosure Elements for Actuarial Valuation Reports on Public Retirement Systems in California , December 2011.
  • Board approval date: Thursday, February 28, 2013

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Press Release

Sec modernizes framework for fund valuation practices.

FOR IMMEDIATE RELEASE 2020-302

Washington D.C., Dec. 3, 2020 —

The Securities and Exchange Commission today announced that it voted to adopt a new rule that establishes an updated regulatory framework for fund valuation practices.  The rule is designed to clarify how fund boards of directors can satisfy their valuation obligations in light of market developments, including an increase in the variety of asset classes held by funds and an increase in both the volume and type of data used in valuation determinations.

The Commission last addressed valuation practices under the Investment Company Act of 1940 in a comprehensive manner in a pair of releases over 50 years ago.  Since then, markets and fund investment practices have evolved considerably.  Many funds now engage third-party pricing services to provide pricing information, particularly for thinly traded or more complex assets.  In addition, significant regulatory developments have altered how boards, investment advisers, independent auditors, and other market participants address valuation under the federal securities laws.  The rule recognizes and reflects these changes, including the important role that funds’ investment advisers may play and the expertise they may provide.

“Main Street investors increasingly access our capital markets through funds and rely on them to value their investments properly,” said SEC Chairman Jay Clayton.  “Today’s rule is designed to improve funds’ valuation practices, including by providing for effective board oversight, for the benefit and protection of fund investors.”

The rule establishes requirements for satisfying a fund board’s obligation to determine fair value in good faith for purposes of the Investment Company Act.  The rule requires a board or its valuation designee to assess and manage material risks associated with fair value determinations; select, apply and test fair value methodologies; and oversee and evaluate any pricing services used. 

The rule recognizes that most fund boards do not play a day-to-day role in the pricing of fund investments, and so permits boards to designate the determination of fair value to certain parties.  This designation will be subject to detailed conditions and oversight requirements, including specific reporting by the valuation designee both periodically and promptly; and clear specification of responsibilities and reasonable segregation of duties among the valuation designee’s personnel.  The rule makes clear that a board’s effective oversight of this process must be active. In addition, certain policies and procedures must be adopted and implemented in connection with the rule.  Finally, the Commission adopted a related recordkeeping rule requiring funds or their advisers to maintain certain documents related to fair value determinations.

*   *   *

Good Faith Determinations of Fair Value Under the Investment Company Act of 1940

The Commission voted to adopt a new rule providing a framework for fund valuation practices.  New rule 2a-5 under the Investment Company Act of 1940 (the “Act”) establishes requirements for determining fair value in good faith for purposes of the Act. The rule will permit boards, subject to board oversight and certain other conditions, to designate certain parties to perform the fair value determinations. The rule also defines when market quotations are “readily available” for purposes of the Act, the threshold for determining whether a fund must fair value a security. The Commission also adopted new rule 31a-4, which provides the recordkeeping requirements associated with fair value determinations. Finally, the Commission is rescinding previously issued guidance on related issues, including the role of the board of directors in determining fair value and the accounting and auditing of fund investments.

Fair Value As Determined in Good Faith

New rule 2a-5 will require the performance of certain functions in order to determine in good faith the fair value of a fund’s investments. These functions include periodically assessing and managing material risks associated with fair value determinations, selecting, applying and testing fair value methodologies, and overseeing and evaluating any pricing services used.

Performance of Fair Value Determinations

Under the Act, securities and assets without readily available market quotations are valued at fair value as determined in good faith by a fund’s board of directors. The rule confirms that a board can make this determination itself. The rule also permits a board to assign the determination to a “valuation designee,” subject to additional conditions and oversight requirements. The valuation designee may be the fund’s investment adviser or, if the fund is internally managed, an officer of the fund. If the board designates the determination of fair value to a valuation designee, certain additional requirements apply, including:

  • Board oversight of the valuation designee;
  • Periodic and prompt reporting to the board; and
  • Clear specification of the titles and functions of the persons responsible for fair value determinations, and reasonable segregation of duties among the designee’s personnel.

In addition, because a unit investment trust (“UIT”) does not have a board or investment adviser, the rule requires a UIT’s trustee or depositor to determine fair value in good faith.

Recordkeeping

In connection with the adoption of new rule 2a-5, the Commission also adopted new rule 31a-4 under the Act. This rule will require funds or their advisers to maintain appropriate documentation to support fair value determinations and, where applicable, documentation related to the designation of the valuation designee.

Readily Available Market Quotations

Under the Act, fund investments must be fair valued where market quotations are not “readily available.” The new rule provides that a market quotation is readily available only when that quotation is a quoted price (unadjusted) in active markets for identical investments that the fund can access at the measurement date, provided that a quotation will not be readily available if it is not reliable.

Rescission of Prior Commission Releases and Review of Relevant Staff Guidance

In view of the new rule’s modernized framework for fund valuation, the Commission will rescind two releases, Accounting Series Release 113 (ASR 113) and Accounting Series Release 118 (ASR 118), which provide Commission guidance on, among other things, how to determine fair value for restricted securities. In addition, certain additional Commission guidance, staff letters and other staff guidance addressing a board’s determination of fair value and other matters will be withdrawn or rescinded.

What’s Next?

Rules 2a-5 and 31a-4 will become effective 60 days after publication in the Federal Register, and will have a compliance date 18 months following the effective date to provide sufficient time for funds and valuation designees to prepare to come into compliance with the rules. A fund may voluntarily comply with the rules after the effective date, and in advance of the compliance date, under certain conditions.  

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Actuarial Valuations

PERA is required by statute to hire an actuary to prepare actuarial valuations for PERA’s cost-sharing defined benefit plans on an annual basis. That actuarial valuation provides information essential to understanding the financial health of those plans and helps determine the level of contributions needed in order for those plans to become or remain fully funded.

Beginning in 2014, new pension accounting and financial reporting standards issued by the Governmental Accounting Standards Board require PERA to develop a second actuarial valuation for each plan to derive accounting information PERA and its employers need for their financial statements, required supplementary information, and footnote disclosures.

The first set of actuarial valuations (funding valuations) is used to determine the financial health of pension plans and how to fund them. The second set of actuarial valuations (GASB valuations) is used to determine how accountants account for pension costs. Many of the actuarial assumptions and methods used to develop the actuarial valuations are the same. There are a few assumptions and methods, however, that differ between the two types of actuarial valuations. Because of that, there are often differences in the results. As an example, the funding valuations use an actuarial value of assets when determining the unfunded liability, which is smoothed over a 5-year period, while the GASB valuations use the market value of assets, which is not smoothed.

More information about the two sets of actuarial valuations is available in the Actuarial Section of our Annual Comprehensive Financial Report . All actuarial valuations listed below are “funding” valuations unless noted as “GASB” valuations.

Fiscal Year 2023 Valuations

Actuarial valuation reports as of july 1, 2023.

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Correctional Plan

GASB Statements No. 67 and No. 68 Accounting and Financial Reporting for Pensions June 30, 2023

Prior valuations, actuarial valuation reports as of july 1, 2022.

Police & Fire Plan

GASB Statements No. 67 and No. 68 Accounting and Financial Reporting for Pensions June 30, 2022

Actuarial valuation reports as of july 1, 2021, gasb statements no. 67 and no. 68 accounting and financial reporting for pensions june 30, 2021, actuarial valuation reports as of july 1, 2020, gasb statements no. 67 and no. 68 accounting and financial reporting for pensions june 30, 2020, actuarial valuation reports as of july 1, 2019, gasb statements no. 67 and no. 68 accounting and financial reporting for pensions june 30, 2019, actuarial valuation reports as of july 1, 2018, gasb statements no. 67 and no. 68 accounting and financial reporting for pensions june 30, 2018, actuarial valuation reports as of july 1, 2017, gasb statements no. 67 and no. 68 accounting and financial reporting for pensions june 30, 2017, actuarial valuation reports as of july 1, 2016, gasb statements no. 67 and no. 68 accounting and financial reporting for pensions june 30, 2016, actuarial valuation reports as of july 1, 2015, gasb statements no. 67 and no. 68 accounting and financial reporting for pensions june 30, 2015.

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What Is Valuation?

Understanding valuation, how earnings affect valuation, limitations of valuation.

  • Valuation FAQs

The Bottom Line

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James Chen, CMT is an expert trader, investment adviser, and global market strategist.

funding valuation report

Valuation is the analytical process of determining the current (or projected) worth of an asset or a company. There are many techniques used for doing a valuation. An analyst placing a value on a company looks at the business's management, the composition of its capital structure , the prospect of future earnings, and the  market value of its assets, among other metrics.

Fundamental analysis is often employed in valuation, although several other methods may be employed such as the capital asset pricing model (CAPM) or the dividend discount model (DDM).

Key Takeaways

  • Valuation is a quantitative process of determining the fair value of an asset, investment, or firm.
  • In general, a company can be valued on its own on an absolute basis, or else on a relative basis compared to other similar companies or assets.
  • There are several methods and techniques for arriving at a valuation—each of which may produce a different value.
  • Valuations can be quickly impacted by corporate earnings or economic events that force analysts to retool their valuation models.
  • While quantitative in nature, valuation often involves some degree of subjective input or assumptions.

Investopedia / Mira Norian

A valuation can be useful when trying to determine the  fair value of a security, which is determined by what a buyer is willing to pay a seller, assuming both parties enter the transaction willingly. When a security trades on an exchange, buyers and sellers determine the market value of a stock or bond.

The concept of intrinsic value , however, refers to the perceived value of a security based on future earnings or some other company attribute unrelated to the market price of a security. That's where valuation comes into play. Analysts do a valuation to determine whether a company or asset is overvalued or undervalued by the market.

Types of Valuation Models

  • Absolute valuation  models  attempt to find the intrinsic or "true" value of an investment based only on fundamentals. Looking at fundamentals simply means you would only focus on such things as dividends, cash flow, and the growth rate for a single company, and not worry about any other companies. Valuation models that fall into this category include the dividend discount model, discounted cash flow model, residual income model, and asset-based model.
  • Relative valuation  models,  in contrast, operate by comparing the company in question to other similar companies. These methods involve calculating multiples and ratios, such as the price-to-earnings multiple, and comparing them to the multiples of similar companies.

For example, if the P/E of a company is lower than the P/E multiple of a comparable company, the original company might be considered undervalued. Typically, the relative valuation model is a lot easier and quicker to calculate than the absolute  valuation  model, which is why many investors and analysts begin their analysis with this model.

Types of Valuation Methods

There are various ways to do a valuation.

Comparables Method

The comparable company analysis  is a method that looks at similar companies, in size and industry, and how they trade to determine a fair value for a company or asset. The past transaction method looks at past transactions of similar companies to determine an appropriate value. There's also the asset-based valuation method, which adds up all the company's asset values, assuming they were sold at fair market value, to get the intrinsic value.

In investments, a comparables approach is often synonymous with relative valuation .

Sometimes doing all of these and then weighing each is appropriate to calculate intrinsic value. Meanwhile, some methods are more appropriate for certain industries and not others. For example, you wouldn't use an asset-based valuation approach to valuing a consulting company that has few assets; instead, an earnings-based approach like the DCF would be more appropriate.

Discounted Cash Flow Method

Analysts also place a value on an asset or investment using the cash inflows and outflows generated by the asset, called a discounted cash flow  (DCF) analysis. These cash flows are discounted into a current value using a discount rate, which is an assumption about interest rates or a minimum rate of return assumed by the investor.

DCF approaches to valuation are used in pricing stocks, such as with dividend discount models like the Gordon growth model.

If a company is buying a piece of machinery, the firm analyzes the cash outflow for the purchase and the additional cash inflows generated by the new asset. All the cash flows are discounted to a present value, and the business determines the net present value (NPV). If the NPV is a positive number, the company should make the investment and buy the asset.

Precedent Transactions Method

The precedent transaction method compares the company being valued to other similar companies that have recently been sold. The comparison works best if the companies are in the same industry. The precedent transaction method is often employed in mergers and acquisition transactions.

The earnings per share  (EPS) formula is stated as earnings available to common shareholders divided by the number of common stock shares outstanding. EPS is an indicator of company profit because the more earnings a company can generate per share, the more valuable each share is to investors.

Analysts also use the price-to-earnings (P/E) ratio for stock valuation, which is calculated as the market price per share divided by EPS. The P/E ratio calculates how expensive a stock price is relative to the earnings produced per share.

For example, if the P/E ratio of a stock is 20 times earnings, an analyst compares that P/E ratio with other companies in the same industry and with the ratio for the broader market. In equity analysis, using ratios like the P/E to value a company is called a multiples-based, or multiples approach, valuation. Other multiples, such as EV/EBITDA , are compared with similar companies and historical multiples to calculate intrinsic value.

When deciding which valuation method to use to value a stock for the first time, it's easy to become overwhelmed by the number of valuation techniques available to investors. There are valuation methods that are fairly straightforward while others are more involved and complicated.

Unfortunately, there's no one method that's best suited for every situation. Each stock is different, and each industry or sector has unique characteristics that may require multiple valuation methods. At the same time, different valuation methods will produce different values for the same underlying asset or company which may lead analysts to employ the technique that provides the most favorable output.

Those interested in learning more about valuation and other financial topics may want to consider enrolling in one of the best personal finance classes .

What Is an Example of Valuation?

A common example of valuation is a company's market capitalization. This takes the share price of a company and multiplies it by the total shares outstanding. For example, if a company's share price is $10, and the company has 2 million shares outstanding, its market capitalization would be $20 million.

How Do You Calculate Valuation?

There are many ways to calculate valuation and will differ on what is being valued and when. A common calculation in valuing a business involves determining the fair value of all of its assets minus all of its liabilities. This is an asset-based calculation.

What Is the Purpose of Valuation?

The purpose of valuation is to determine the worth of an asset or company and compare that to the current market price. This is done so for a variety of reasons, such as bringing on investors, selling the company, purchasing the company, selling off assets or portions of the business, the exit of a partner, or inheritance purposes.

Valuation is the process of determining the worth of an asset or company . Valuation is important because it provides prospective buyers with an idea of how much they should pay for an asset or company and for prospective sellers, how much they should sell for.

Valuation plays an important role in the M&A industry, as well as in regard to the growth of a company. There are many valuation methods, all of which come with their pros and cons.

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  • 5 Must-Have Metrics for Value Investors 8 of 37
  • Earnings Per Share (EPS): What It Means and How to Calculate It 9 of 37
  • P/E Ratio Definition: Price-to-Earnings Ratio Formula and Examples 10 of 37
  • Price-to-Book (PB) Ratio: Meaning, Formula, and Example 11 of 37
  • Price/Earnings-to-Growth (PEG) Ratio: What It Is and the Formula 12 of 37
  • Fundamental Analysis: Principles, Types, and How to Use It 13 of 37
  • Absolute Value: Definition, Calculation Methods, Example 14 of 37
  • Relative Valuation Model: Definition, Steps, and Types of Models 15 of 37
  • Intrinsic Value of a Stock: What It Is and Formulas to Calculate It 16 of 37
  • Intrinsic Value vs. Current Market Value: What's the Difference? 17 of 37
  • The Comparables Approach to Equity Valuation 18 of 37
  • The 4 Basic Elements of Stock Value 19 of 37
  • How to Become Your Own Stock Analyst 20 of 37
  • Due Diligence in 10 Easy Steps 21 of 37
  • Determining the Value of a Preferred Stock 22 of 37
  • Qualitative Analysis 23 of 37
  • How to Choose the Best Stock Valuation Method 24 of 37
  • Bottom-Up Investing: Definition, Example, Vs. Top-Down 25 of 37
  • Financial Ratio Analysis: Definition, Types, Examples, and How to Use 26 of 37
  • What Book Value Means to Investors 27 of 37
  • Liquidation Value: Definition, What's Excluded, and Example 28 of 37
  • Market Capitalization: What It Means for Investors 29 of 37
  • Discounted Cash Flow (DCF) Explained With Formula and Examples 30 of 37
  • Enterprise Value (EV) Formula and What It Means 31 of 37
  • How to Use Enterprise Value to Compare Companies 32 of 37
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  • Return on Equity (ROE) Calculation and What It Means 34 of 37
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Key Differences Between the Funding Valuation and the PAS 19 Valuation

funding valuation report

As many companies request us to do an actuarial valuation for them on a yearly basis, some of the common questions we get from clients include: What’s the difference between the Philippine Accounting Standard No. 19 (PAS 19) Valuation and the Funding Valuation? Do I really need both valuations done every year? How often should we do the valuation?

Understanding the key difference between the PAS 19 and Funding valuations will guide you when a valuation is necessary. Here are 4 key differences:

1.  Purpose – The PAS 19 Valuation is for accounting disclosures while the Funding Valuation is for budgeting purposes. It’s not mandatory to set up a Retirement Plan, what is mandated is for the employer to pay a retirement benefit for eligible employees under Republic Act 7641 . In any case, whether a company has a retirement plan or not, the PAS 19 Valuation is needed to satisfy the Securities and Exchange Commission’s (SEC) mandate that all corporations should adopt the Philippine Financial Reporting Standards (PRFS) . The output of the PAS 19 Valuation is to determine the asset/liability and income/expense of the company’s retirement benefit obligations that your external auditor will disclose in the annual Audited Financial Statements (AFS). 

The Funding Valuation is applicable if a company is considering to set up their Retirement Plan or already has one. The Funding report gives management an idea of the recommended contributions to the retirement fund and for budgeting the future contributions. The Funding Valuation is also a requirement of the Bureau of Internal Revenue (BIR) when applying for tax exemption of the Retirement Plan. This report is also used as a basis for tax deductibility purposes since contributions to the fund is a deductible expense.

2.  External Partners – Normally if a financial institution like a bank, insurance company or investment house approaches you to offer their services in managing your retirement fund, then it’s the Funding Valuation that is necessary to know how much will be the recommended and projected contributions to the fund. The company’s contributions to the retirement trust fund will be a tax deductible expense up to the amount reflected in the Funding Valuation.

If it is the external auditor who approaches you and requests for an actuarial valuation, then in most cases, it’s the PAS 19 Valuation that is needed. The external auditor will use the figures reflected from the PAS 19 report in your Audited Financial Statements (AFS) that will be submitted to the SEC. The PAS 19 disclosures has nothing to do with tax deductibility but rather just for accruals and reporting purposes of retirement liabilities and expenses.

3.  Assumptions – The methodology of both valuations is the same, which is the projected unit credit method (PUCM). The assumptions such as salary increase rate and attrition rate are the same for both valuations. The only difference is that the PAS 19 Valuation uses a discount rate while the Funding Valuation uses an investment rate of return. 

The discount rate is the basis to calculate the present value of the retirement benefit obligation in the PAS 19 Valuation. The discount rate is based on the government securities BVAL rates that are published in the PDS Group website. On the other hand, the Funding Valuation uses an investment rate of return (IRR), which is used to get the present value of the past service liability. The basis of the IRR is the actual and projected performance of your retirement fund as advised by your fund manager.

If you notice, the basis for the discount rate has nothing to do with the actual performance of the company’s retirement fund. Therefore, the Funding Valuation provides a better economic indicator of the funded level of the retirement fund since the basis for getting the present value is the average performance of the fund based on its portfolio mix.

4.  Frequency – The PAS 19 Valuation is reported annually as the audit period starts. The valuation is a requirement so that your auditor can incorporate the results to your financial statements before they are submitted to the SEC. Non-compliance to PAS may result in penalties by the SEC.

The Funding Valuation is normally done when a retirement plan is set up or is amended as this also is a requirement of the BIR. In normal circumstances, the Funding Valuation is performed every 2 – 3 years to ensure that the recommended contributions are up to date given that employee profile, salaries and investments may have had significant adjustments.

To request for a proposal, kindly email us your current employee head count at [email protected] .

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Nvidia-backed CoreWeave in talks to raise funding at $16B valuation: report

Abstract Big Data

CoreWeave is in talks to raise equity capital in a transaction that would value the specialized cloud provider at $16 billion, Bloomberg reported Friday, citing people familiar with the matter.

According to the report, the company is discussing selling both new and existing shares, and employees may tender some of their holdings. Terms haven’t been finalized and could still change, the report added.

Nvidia-backed CoreWeave previously raised $642 million in a minority stake sale in December that valued the company at $7 billion. The round consisted of Fidelity Management & Research Company, Investment Management Corporation of Ontario, and J. P. Morgan Asset Management, among others.

In August, the cloud service startup made headlines for raising $2.3 billion in debt collateralized by Nvidia's ( NASDAQ: NVDA ) artificial intelligence chips.

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funding valuation report

Cameo Valuation Plunges at Least 90% in ‘Cramdown’ Funding Round

Cameo authorized a $28 million round of funding last week that will drastically reduce its valuation, the company told shareholders, reflecting a big slowdown in the celebrity video shoutout app’s business.

The funding, led by existing investor Valor Equity Partners, would value the company at less than $100 million, measured after the investment, an investor said. That would represent at least a 90% drop from its previous value. Its $1 billion peak valuation dates back to a funding round in March 2021, after its platform for personalized videos from athletes and actors took off during the pandemic.

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Hipgnosis History Explainer: What Led to the Music Publishing Disruptor’s Plummeting Valuation

By Robert Steiner

Robert Steiner

  • Hipgnosis History Explainer: What Led to the Music Publishing Disruptor’s Plummeting Valuation 2 days ago
  • Live Music Is Bigger Than Ever, So Why Are Festivals Canceling? 4 days ago
  • Were Hollywood’s Strikes Really a $6 Billion Loss? More Like $1.4 Billion, Says One Economist 2 weeks ago

Illustration of a stock ticker interacting with the Hipgnosis logo

In this article

  • A detailed explanation of the financial complexities behind the rise and fall of Hipgnosis
  • A timeline of recent events culminating in Hipgnosis Songs Fund’s significant devaluation
  • A breakdown of the many branches in the music royalty company’s family tree

In June 2021, exactly a month after self-described industry disruptors Hipgnosis Songs Fund (HSF) bought the Red Hot Chili Peppers ’ catalog for $140 million, founder Merck Mercuriadis addressed criticisms of his company in Variety — namely that HSF was wildly overpaying for music, inflating the market in the process.

“There’s no bubble here. A bubble is when somebody is overpaying for something that doesn’t have the sort of metrics that these investments have,” he said.

Fast-forward to this week, and the music catalog market hasn’t burst yet . Hipgnosis, on the other hand, is imploding.

On Thursday, investment banking firm Shot Tower Capital completed its months-long strategic review of HSF assets, a reevaluation brought about following investors’ loss of confidence in HSF leadership. Among other revelations, the report estimates HSF’s assets at an average of $1.95 billion — $670 million less than the $2.62 billion valuation it got last year.

The report caps several months of infighting, leadership turnover and plummeting stocks at Hipgnosis — a swift fall from grace less than six years after the bold “song management” company rattled the music publishing industry with its relentless eight- and nine-figure catalog acquisitions.

So what happened? Like any timeline of an upstart that tries to break the rules, it’s complicated, dramatic and a cautionary tale for companies that try to blaze their own path to success.

2018-21: Hipgnosis Rises In 2018, Mercuriadis — a manager with a personality only outsized by clients including Morrissey, Elton John and Beyoncé — and disco pioneer Nile Rogers founded Hipgnosis on the belief that classic songs were assets as good as gold or oil : No matter the market’s activity, music will always be playing. And with the rise of streaming, Mercuriadis anticipated a new royalty goldmine for song copyright holders.

Hipgnosis’ business model wasn’t novel. Publishers such as Primary Wave, BMG and Reservoir have been acquiring song rights and building income streams for years. But rather than employ songwriters, Hipgnosis was going to work only with established artists — time-tested icons and modern-day hitmakers alike — who owned their work.

And the company was willing to spend a lot of money. By October 2019, just over a year after debuting on the London Stock Exchange, HSF had raised roughly $800 million and owned around 6,000 songs worth $1.3 billion. From there, a music catalog gold rush ensued.

In October 2021, Hipgnosis Song Management (HSM), HSF’s investment adviser run by Mercuriadis, launched an investment deal with Blackstone, which backed the $1 billion Hipgnosis Songs Capital (HSC) private fund in exchange for an ownership stake in HSM.

2022: The Cracks Form In July 2022, HSF released its year-end financial report for the 12 months ending in March. Despite not buying catalogs for the last six months of the fiscal year — HSC took the buying reins following Blackstone’s investment — the company’s value grew from $2.55 billion to $2.69 billion.

As for how the company still grew after months of inactivity , skeptics pointed to the controversial 8.5% discount rate that HSF’s independent valuer, Citrin Cooperman, used in its valuations. It seemed low to some, especially given the skyrocketing post-pandemic interest rates, which, in turn, was potentially inflating HSF’s numbers.

On Sept. 8, the Financial Times published a scathing report claiming HSF had “burned through its funds” and was saddled with $600 million in debt. In response, HSF took a $700 million debt package , while Blackstone encouraged “ greater financial discipline. ” HSF even got a letter of endorsement from J.P. Morgan to calm investors’ nerves, but share prices dropped from 115 pence at the beginning of September to 89 pence by the month’s end.

2023-Present: The Implosion HSF’s 2022 financial report reported $147.2 million in revenue — a loss from the prior year’s $168.3 million. There was also the continued issue of HSF’s declining stock price. “The current share price does not reflect the success of our investment strategy and I know all Shareholders share my frustration and disappointment that this is the case,” Mercuriadis wrote in the report.

On Sept. 14, 2023, HSF proposed to its investors a sale of 29 catalogs to HSC for $440 million, a roundabout way of gaining funds to put toward its debt and a buyback effort to boost the share price, all while keeping the assets in the family. They would vote on the sale at the next annual general meeting, Oct. 26.

What happened next requires context: Collecting song income is complex and slow moving. In the U.S., a panel known as the Copyright Royalty Board retroactively evaluates music royalty rates in five-year periods, determining what entities such as streaming services still owe songwriters and publishers.

Citrin Cooperman and HSM initially anticipated HSF would receive $21.7 million from these retroactive royalty payments for 2018-22. But on Oct. 16, following the Copyright Royalty Board’s completed evaluation, HSF investors were told that Citrin Cooperman drastically reduced that expected revenue to $9.9 million — 54.3% lower than their original number. As a result, HSF investors’ planned interim dividend was put on hold. Shares for HSF dropped by 10% that same day.

Two days later, HSF launched a “ strategic review ” that included whether it continues employing HSM as its adviser. But it can’t just fire HSM, seeing as Mercuriadis had a call option stating that HSM can acquire HSF for a preset sum should its contract ever be terminated. Part of determining that sum includes “the price that any credible third-party is willing to pay to acquire HSF.” In other words, HSM and Blackstone reserved the right to automatically outbid any third parties.

The call option added even more tension between HSF investors and HSM, which all came to a head on Oct. 26, when the former overwhelmingly rejected both the catalog sale to HSC and a continuation vote for company leadership. In a statement, the board said HSF had six months “for the reconstruction, reorganization, or winding-up of the company.”

To make matters worse, in November Mercuriadis faced legal action by Hipgnosis Music Limited, a company he founded in 2015 and wound up a year before launching HSF, which accused him and HSF of diverting business opportunities. Mercuriadis, HSF and HSM all denied the claims.

On Dec. 11, in a release announcing the sale of 20,000 songs to an unnamed seller at a discounted $23.1 million, HSF also appointed Shot Tower, a trusted name in the music publishing world who has facilitated numerous high-profile deals, to lead the strategic review. Just over a week later, the company delayed the release of its half-year financial results due to distrust of Citrin Cooperman’s latest valuation and a “heavily caveated” opinion from HSM.

When it did release the report on Dec. 21, the company had lowered its valuation by 9.2% to reflect the decreased expected royalty payments, reducing its share price yet again.

HSF started 2024 by proposing a “ bung offer ” to circumvent Mercuriadis’ call option, which offered third-party bidders up to a £20 million buyer’s fee. Mercuriadis and HSM promptly refused . In its next release, HSF accused its investment adviser of “ cherry-picking ” the 29 catalogs from that botched sale to HSC, selecting the ones that were “growing at materially higher rates to the overall portfolio.”

In an attempt to ease tensions, Mercuriadis stepped down as CEO of HSM on Feb. 2, but HSF nevertheless endorsed the bung offer . Later that month, HSF announced it intended to seek full indemnity in High Court regarding the ongoing lawsuit with Hipgnosis Songs Limited after Mercuriadis refused their request.

Shot Tower gave an update on its findings to investors on March 4, placing the average value of HSF's portfolio at $1.93 billion — $690 million less, or a 26.3% decrease, than Citrin Cooperman’s $2.62 billion valuation. The news sent HSF’s share price to an all-time low of 53 pence.

On March 18, HSF’s valuation was lowered yet again by 7.6% , with the company directly placing blame on an accounting “error” by HSM. Added in the same statement was that, since HSM’s service fees were determined by HSF’s net asset value, “the Company has almost certainly been overcharged investment advisory fees by the Investment Adviser. The Board has reserved all the Company’s rights against the Investment Adviser.” That last sentence, as reports have pointed out , is business speak for “considering legal action.”

That brings us to yesterday, when Shot Tower issued its full report, slightly raising HSF’s valuation to $1.95 billion. But that’s the extent of the good news, as 67 of HSF’s 105 acquisitions have depleted in value, particularly the more recently released songs, and three-quarters of its catalogs missed growth projections by an average 23% per year.

The blame is placed squarely on HSM, which the report said had “failed to invest in systems and provide the services required to effectively manage a catalog of 40,000+ songs generating +120 million of royalty income annually.” The list of grievances is long, from implying greater ownership of its assets in disclosures to investors to cherry-picking the most valuable catalogs for the botched sale to HSC.

HSF said in a statement that it will continue “to assess all options for the future of the Company” and announce their next steps on April 26. HSM, meanwhile, has said, “There are aspects of the report that HSM strongly disagrees with and considers to be factually inaccurate and misleading.” The company promises to air it grievances “in due course.”

We will soon see how this saga will conclude, but in the meantime, HSF stocks surprisingly jumped following the report. Perhaps that means there’s still faith in the company’s future, but it’s unclear if that path forward will include its investment adviser — or ambitious founder.

Live Music Is Bigger Than Ever, So Why Are Festivals Canceling?

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Paradigm’s funding takes Farcaster’s dev to unicorn status

A new funding round is set to lift the valuation of Merkle Manufactory — the company behind the social network Farcaster — to the $1 billion mark, according to a Bloomberg report citing sources familiar with the matter. 

Leading the round is crypto investment firm Paradigm, whose portfolio includes major crypto firms, such as Coinbase, Blur, dYdX, Compound and Citadel Securities.

Merkle was co-founded in 2020 by former Coinbase executives Dan Romero and Varun Srinivasan. The company’s flagship is the social media application Warpcast, built on top of the decentralized network for social media apps Farcaster.

funding valuation report

Since January, the Farcaster platform has seen a significant jump in user activity following Warpcast’s introduction of Frames — a feature that allows apps to run inside posts without leaving the platform. For instance, Frames enables users to mint nonfungible tokens, perform transactions, access external blog posts and respond to surveys directly within the app.

funding valuation report

Decentralized social media platforms are a new class of networks that leverage blockchain technology to offer users ownership over their data, content and interactions, moving away from the centralized control seen in traditional social media.

These platforms are characterized by features such as censorship resistance and content monetization without intermediaries. Popular names in this sector include Friend.tech, Minds and Mastodon. According to two industry executives, one of the biggest challenges decentralized social media platforms face is user retention.

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COMMENTS

  1. The Role of the Actuarial Valuation Report in Plan Funding

    The actuarial valuation report has always played an important role as the basic source document for information regarding actuarially determined contributions and the funded status of pension and other post-employment benefit (OPEB) plans. [1] The actuarial valuation report, prepared in accordance with Actuarial Standards of Practice (ASOP ...

  2. PDF Fund Valuation Under the SEC's New Fair Value Rule

    on fund valuation in 50 years.6 Funds must comply with this new rule (and companion recordkeeping Rule 31a-4) by September 8, 2022. Given the importance of this new rule and fund valuation generally, we have prepared this report to examine fund valuation practices. In the sections below, we discuss or describe:

  3. Actuarial Valuation: A Pension Fund Appraisal

    Actuarial Valuation: An actuarial valuation is a type of appraisal of a pension fund's assets versus liabilities, using investment , economic and demographic assumptions for the model to determine ...

  4. Funding valuations

    A funding valuation is an assessment of the long-term financial health of a pension plan. The valuation shows whether the plan has a surplus of assets, a shortfall of assets or the right amount of assets needed to pay future pension benefits. A valuation is a good measure of the pension plan's financial health because it looks ahead to the ...

  5. PDF Practical Guidance for Fund Directors on Valuation Oversight

    An important factor to consider as a board defi nes its involve-ment in the valuation process is the adequacy of the fund group's processes and person-nel. The fund's Chief Compliance Offi cer ("CCO"), its external auditors, and independent counsel all provide directors with valuable guidance in the valuation process.

  6. PDF FVA

    FVA - decisions and implementation. Funding Valuation Adjustment (FVA) is a pricing and valuation component of uncollateralized derivatives. FVA has been the subject of much discussion in recent months as some of the world's biggest derivative banks have adapted their valuation models to include it. A number of regulators have raised its ...

  7. How to Present a Valuation Report: Key Sections to Focus On

    7. A valuation report is a document that summarizes the analysis and findings of an appraisal of a business, asset, or equity. It is often used to support transactions, negotiations, or litigation ...

  8. What is a Fund Valuation Policy?

    A valuation policy is an outline of the approach your fund takes to determine the fair value of its portfolio company assets for financial reporting. Rather than being hard- and- fast rules, fund valuation policies are usually flexible frameworks that VC funds create for their portfolio company investments.

  9. SEC Modernizes Framework for Fund Valuation Practices

    2020-302. Washington D.C., Dec. 3, 2020 —. The Securities and Exchange Commission today announced that it voted to adopt a new rule that establishes an updated regulatory framework for fund valuation practices. The rule is designed to clarify how fund boards of directors can satisfy their valuation obligations in light of market developments ...

  10. PDF United States Department of the Treasury District of Columbia Pensions

    As noted on page 55 of this report in the Interest Rates for (Gain)/Loss section, the expected return on assets for the Judicial Retirement Fund is based on the prior year effective interest rate of 2.91% while the D.C. Federal Pension Fund's expected return on assets is based on the first rate on the prior year's yield curve, 0.82%.

  11. Actuarial Valuations

    The first set of actuarial valuations (funding valuations) is used to determine the financial health of pension plans and how to fund them. The second set of actuarial valuations (GASB valuations) is used to determine how accountants account for pension costs. ... Actuarial Valuation Reports as of July 1, 2015. General Plan. Police & Fire Plan.

  12. What Is Valuation?

    Valuation is the process of determining the current worth of an asset or a company; there are many techniques used to determine value. An analyst placing a value on a company looks at the company ...

  13. RPO

    The Plan is responsible for administering three separate trust funds - Death Benefit, Disability, and Retirement. Each fund has its own funding policy and actuarial valuation report. Effective fiscal year 2022-2023, the Retirement Fund valuation is modeled on the following key assumptions and funding policies:

  14. Pension Funding Valuations

    Actuarial valuations are technical reports providing full disclosure of the financial and funding status of public retirement systems administered by the Department of Retirement Systems. Valuations for odd-numbered years are also used to set contribution rates for the ensuing biennium. For those valuations, the Pension Funding Council oversees ...

  15. Actuarial Valuation Reports

    - Valuation assumes this increases at 2.7% per year • Under old policies where all contributions were tied to this payroll, lower payroll would have increased the funding period (and ASC) materially • The change to level dollar financing separates a significant portion of the funding from the

  16. Q3 2023 US VC Valuations Report

    US VC Valuations Report. November 8, 2023. VC valuations stagnate further. With the exception of seed rounds, VC valuations in Q3 continued to descend from peaks registered in 2021 and early 2022. Fewer companies met investors' higher bar for funding, which forced many to resort to bridge financings or stave off raising new capital by cutting ...

  17. 2022 Annual US VC Valuations Report

    Our 2022 Annual US VC Valuations report, sponsored by Morgan Stanley at Work and Reitler, has all the figures and charts to make sense of the year. Median seed valuations grew by 16.7% to $10.5 million, the highest annual value ever recorded by PitchBook. Exits were hit by a freeze in IPOs, driven by unstable market conditions, which leaves a ...

  18. Key Differences Between the Funding Valuation and the PAS 19 Valuation

    The Funding report gives management an idea of the recommended contributions to the retirement fund and for budgeting the future contributions. The Funding Valuation is also a requirement of the Bureau of Internal Revenue (BIR) when applying for tax exemption of the Retirement Plan. This report is also used as a basis for tax deductibility ...

  19. PDF State Employees Retirement Fund Actuarial Valuation Report as of July 1

    The results of the July 1, 2021 annual actuarial valuation of the State Employees Retirement Fund are presented in this report. This report was prepared at the request of the Board and is intended for use by the Board and staff and those designated or approved by the Board. This report may be provided to parties other

  20. Financial Modelling for Fundraising

    The funding requirements and valuation report helps you to approach investor. With out these reports investors will fail to understand the potential and investment opportunity with your startup ... valuation reports, business plans and creating achievable business strategies was challenging. I found the Scaalex team with great patience to ...

  21. Actuarial Valuations

    An Actuarial Valuation is an in-depth actuarial analysis of the pension fund. ERSRI contracts with an independent actuarial consulting firm to perform an Actuarial Valuation of the retirement plan every fiscal year. Each report describes the current actuarial condition of ERSRI, determines recommended employer contribution rates, and analyzes ...

  22. Public Agency Actuarial Valuation Reports

    Public Agency Actuarial Valuation Reports. Public Agency Actuarial Valuation Reports are organized by CalPERS ID, name, type, and county, and can be filtered by each of those categories using the search boxes. Actuarial reports for state and school employers can be found in Forms & Publications. Show entries. Empty Cell.

  23. Nvidia-backed CoreWeave in talks to raise funding at $16B valuation: report

    Terms haven't been finalized and could still change, the report added. Nvidia-backed CoreWeave previously raised $642 million in a minority stake sale in December that valued the company at $7 ...

  24. Cameo Valuation Plunges at Least 90% in 'Cramdown' Funding Round

    Cameo authorized a $28 million round of funding last week that will drastically reduce its valuation, the company told shareholders, reflecting a big slowdown in the celebrity video shoutout app's business.. The funding, led by existing investor Valor Equity Partners, would value the company at less than $100 million, measured after the investment, an investor said.

  25. Hipgnosis: What Led to the Music Disruptor's Plummeting Valuation

    Among other revelations, the report estimates HSF's assets at an average of $1.95 billion — $670 million less than the $2.62 billion valuation it got last year. The report caps several months ...

  26. Paradigm's funding takes Farcaster's dev to unicorn status

    A new funding round is set to lift the valuation of Merkle Manufactory — the company behind the social network Farcaster — to the $1 billion mark, according to a Bloomberg report citing sources familiar with the matter. Leading the round is crypto investment firm Paradigm, whose portfolio includes…

  27. 2023 Annual US VC Valuations Report

    US VC Valuations Report. February 7, 2024. VC valuations slump persists. VC valuations continued to slide from their peaks in 2021 and early 2022, with only pre-seed and seed deals bucking the trend. While median early-stage and late-stage valuations fell to their three- and five-year lows, respectively, an abundance of small funds competing ...

  28. UK biopharma company IntraBio moves HQ to Austin, raises $40M

    A U.K.-based biopharmaceutical company that just raised a new round of funding moved its corporate headquarters to Austin. IntraBio Inc., which is developing drugs to treat neurodegenerative ...

  29. Crypto Social Media Firm Merkle Sees $1 Billion Valuation in Paradigm

    A developer of software for decentralized social-media networks founded by two former Coinbase Global Inc. executives is close to completing a funding round valuing it at about $1 billion, people ...

  30. Amazon spends $2.75B on Anthropic in largest venture investment yet

    Amazon is spending billions more to back an artificial intelligence startup as it looks for an edge in this new technology arms race.