SEC Staff Highlights Private Credit Valuation and Disclosure Considerations

SEC Staff Highlights Fair Value Considerations for Private Credit

The SEC Office of the Chief Accountant and Division of Investment Management issued a staff statement on September 28, 2026, addressing fair value measurement and disclosure considerations for private assets, with particular focus on private credit.

The statement does not create new legal obligations. Instead, it reinforces existing U.S. generally accepted accounting principles (U.S. GAAP) requirements, including Accounting Standards Codification (ASC) Topic 820, Fair Value Measurement.

For certain registrants, it also references the Investment Company Act framework. Private credit managers and other registrants with exposure to private credit assets may wish to assess whether their valuation processes, supporting documentation, and disclosures address the areas highlighted by the staff.

What the SEC Staff Highlighted

The staff noted that private credit valuations often require significant judgment because these assets are generally illiquid and may rely on significant unobservable inputs.

Key considerations include:

• Information quality and management responsibility. A lack of timely borrower information does not remove management’s responsibility to estimate fair value. Firms should consider whether borrower reporting requirements and cadence support ongoing monitoring and financial reporting.
• Market participant perspective. Valuations should reflect assumptions that market participants would use. Borrower-specific information may need to be supplemented or adjusted using reasonably available market information, such as credit spreads, liquidity conditions, comparable transactions, public market equivalents, or relevant credit indices.
• Calibration. When a transaction price represents fair value at initial recognition, valuation techniques should be calibrated accordingly. Firms should periodically reassess whether model outputs remain consistent with available market information as conditions evolve.
• Tailored Level 3 disclosures. The staff emphasized that disclosures should clearly describe the valuation techniques used, significant unobservable inputs, and how changes in those inputs could affect reported fair value. Boilerplate or overly aggregated disclosures may not provide investors with sufficient context.
• Non-accrual and payment-in-kind interest transparency. Clear disclosure of non-accrual criteria, payment-in-kind (PIK) interest recognition, and related portfolio trends may be material to investors’ understanding of income quality, credit risk, and portfolio performance.
• Net asset value practical expedient. The use of net asset value (NAV) as a practical expedient is optional and determined on an investment-by-investment basis. Management remains responsible for concluding that the applicable conditions are met and for considering reasonably available information, including relevant secondary market information.
• Audit evidence. The staff reminded auditors of the importance of professional skepticism and persuasive audit evidence when evaluating fair value estimates, particularly where management relies on investee-reported NAV or significant unobservable inputs.

Practical Next Steps

Private credit managers and other affected registrants may consider:

• Reviewing whether borrower reporting requirements provide sufficient, timely information to support valuation and financial reporting.
• Assessing calibration documentation and the use of market-based inputs in valuation processes.
• Comparing Level 3 disclosures against the staff’s reminders regarding specificity, disaggregation, significant inputs, and measurement uncertainty.
• Evaluating whether non-accrual and PIK interest disclosures clearly explain relevant criteria and portfolio trends.
• Confirming that any use of the NAV practical expedient is supported by investment-specific analysis and documentation.
• Coordinating, as appropriate, with valuation committees, finance teams, compliance personnel, and auditors on documentation expectations.