Accounting for Secondary Transactions ?
I am interested in, yet unfamiliar with, the accounting for a secondary fund investment. Particularly, the treatment of the initial discount to NAV. I read mixed answers after some googling. Does anyone have experience with the following:
(1) Is accounting as a stock or asset sale more common? ..Maybe completely dependent upon the specific transaction at hand and the parties involved.
(2) Does LP vs GP-led make a difference (e.g., asset sale more common for LP-led txns, or vice versa)?
(3) Thinking about the journal entries, is it correct to say the fund asset is recorded at the purchase price (not NAV) and the discount is recorded to (negative) goodwill?
(4) Returns: How then does the firm consider the initial discount to NAV in tracking the returns of the investment (over the life of the investment or at exit)? E.g., I would assume a MOIC calculation would consider purchase price (at/including discount) as opposed to the NAV at acquisition (exclusive of any discount).
Any insight is greatly appreciated. Thanks!
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