Ensuring fair treatment of investors: a novel approach for revaluation of liabilities from unissued and unredeemed investment shares in collective investment funds
DOI: https://doi.org/10.3846/tede.2026.25942Abstract
In the dynamic world of open-ended investment funds, where investors continuously enter and exit, and in funds with multiple classes of investment shares, a critical issue often goes unnoticed: the revaluation of liabilities from unissued and unredeemed shares. These liabilities, typically left unsettled and unrevalued for extended periods, can significantly skew the Net Asset Value per Share (NAVpS), leading to unfair treatment of different groups of investors. In this paper, a novel methodological framework designed to adjust the NAVpS is introduced that not only ensures fair treatment among all groups of investors, but also provides unbiased performance information to potential investors. It also addresses the complexities of non-revalued liabilities in funds with multiple investment classes, which can disrupt class allocation ratios. The practical implications of the framework are profound. The issues of fair allocation across multiple investment classes and mitigating distortions arising from unrevalued liabilities related to unissued and unredeemed shares are addressed. As demonstrated in focused case studies, these distortions can become significant, depending on the size of the liabilities and changes in the value of underlying assets. We believe that our approach contributes to a more transparent investment landscape for all stakeholders.
Keywords:
collective investment funds, UCITS, AIFs, fair treatment, valuation, revaluation, liabilities, unissued, unredeemed, investment shares, IFRSHow to Cite
Share
License
Copyright (c) 2026 The Author(s). Published by Vilnius Gediminas Technical University.
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
Agarwal, V., Barber, B., Cheng, S., Hameed, A., & Yasuda, A. (2023). Private company valuations by mutual funds. Review of Finance, 27(2), 693–738. https://doi.org/10.1093/rof/rfac037
Aguinis, H., Beltran, J. R., Archibold, E. E., Jean, E. L., & Rice, D. B. (2023). Thought experiments: Review and recommendations. Journal of Organizational Behavior, 44(3), 544–560. https://doi.org/10.1002/job.2658
Altamuro, J., & Zhang, H. (2013). The financial reporting of fair value based on managerial inputs versus market inputs: Evidence from mortgage servicing rights. Review of Accounting Studies, 18, 833–858. https://doi.org/10.1007/s11142-013-9234-y
Andrejcik, D., Singh, G., & Halari, A. (2021). Fair value accounting: Perspective on stewardship function. Journal of Accounting and Taxation, 13(4), 226–242. https://doi.org/ 10.5897/JAT2021.0483
Balcerzak, A. P., Zinecker, M., Skalický, R., Rogalska, E., & Doubravský, K. (2023). Technology-oriented start-ups and valuation: A novel approach based on specific contract terms. Technological Forecasting and Social Change, 197, Article 122876. https://doi.org/10.1016/j.techfore.2023.122876
Biddle, G. C., Hilary, G., & Verdi, R. S. (2009). How does financial reporting quality relate to investment efficiency? Journal of Accounting & Economics, 48(2), 112–131. https://doi.org/10.1016/j.jacceco.2009.09.001
Brown, G. W., Ghysels, E., & Gredil, O. R. (2023). Nowcasting net asset values: The case of private equity. The Review of Financial Studies, 36(3), 945–986. https://doi.org/10.1093/rfs/hhac045
Busso, D. (2015). Does IFRS 13 improve the disclosure of the fair value measurement?: An empirical analysis of the real estate sector in Europe. GSTF Business Review (GBR), 3, Article 1. https://doi.org/10.7603/s40706-014-0029-3
Cropper, P., & Cowton, C. J. (2021). Financial scenario modelling: a study of UK universities. Journal of Higher Education Policy and Management, 43(6), 592–606. https://doi.org/10.1080/1360080X.2021.1888846
Cropper, P., & Cowton, C. (2025). A mixed methods study of influences on perceived budgeting accuracy in UK universities. Journal of Applied Accounting Research, 26(2), 306–332. https://doi.org/10.1108/jaar-11-2023-0337
De Luca, N. (2021). Share classes in investment funds and fair treatment of all investors. European Business Law Review, 32(4), 727–741. https://doi.org/10.54648/EULR2021025
Elbannan, M. A. (2022). Managerial learning and the informational role of fair values. The Journal of Corporate Accounting & Finance, 33(2), 49–67. https://doi.org/10.1002/jcaf.22535
Eling, M., & Faust, R. (2010). The performance of hedge funds and mutual funds in emerging markets. Journal of Banking & Finance, 34(8), 1993–2009. https://doi.org/10.1016/j.jbankfin.2010.01.008
Fagetan, A. M. (2021). Regulation of hedge funds in the EU. In The regulation of hedge funds (pp. 49–122). Palgrave. https://doi.org/10.1007/978-3-030-63706-4_2
Ferreira, P. H., Kräussl, R., Landsman, W. R., Borysoff, M. N., & Pope, P. F. (2019). Reliability and relevance of fair values: Private equity investments and investee fundamentals. Review of Accounting Studies, 24, 1427–1449. https://doi.org/10.1007/s11142-019-09509-9
Gregoriou, G. N. (2006). Fund of hedge funds: Performance, assessment, diversification, and statistical properties (Vol. 10). Elsevier.
Gortsos, C. (2017). The scope of the EU Alternative Investment Fund Managers Directive (2011/61/EU) and its significance for EU investment funds law. SSRN. https://ssrn.com/abstract=3000356
Henderson, D., & Mamo, K. (2025). A survey of research on fair value accounting for financial institutions. Accounting Perspectives, 24(2), 307–342. https://doi.org/10.1111/1911-3838.12391
Hitz, J. M. (2007). The decision usefulness of fair value accounting – a theoretical perspective. European Accounting Review, 16(2), 323–362. https://doi.org/10.1080/09638180701390974
Hoffmann, B., & Paetzmann, K. (2018). Investor protection, valuation methods and the German alternative funds industry. Journal of Risk Finance, 19(2), 174–189. https://doi.org/10.1108/JRF-06-2017-0101
Hu, Y., Al-Barakati, A., & Rani, P. (2024). Investigating the Internet-of-Things (IoT) risks for supply chain management using q-rung orthopair fuzzy-SWARA-ARAS framework. Technological and Economic Development of Economy, 30(2), 376–401. https://doi.org/10.3846/tede.2022.16583
International Accounting Standards Board. (2011). IFRS 13: Fair value measurement. IFRS Foundation. https://www.ifrs.org/issued-standards/list-of-standards/ifrs-13-fair-value-measurement/
Jenkinson, T., Landsman, W. R., Rountree, B. R., & Soonawalla, K. (2020). Private equity net asset values and future cash flows. The Accounting Review, 95(1), 191–210. https://doi.org/10.2308/accr-52486
Lawrence, A., Siriviriyakul, S., & Sloan, R. G. (2016). Who’s the fairest of them all? Evidence from closed-end funds. The Accounting Review, 91(1), 207–227. https://doi.org/10.2308/accr-51152
Leuz, C., & Wysocki, P. D. (2016). The economics of disclosure and financial reporting regulation: Evidence and suggestions for future research. Journal of Accounting Research, 54(2), 525–622. https://doi.org/10.1111/1475-679X.12115
Liao, L., Kang, H., & Morris, R. D. (2021). The value relevance of fair value and historical cost measurements during the financial crisis. Accounting and Finance, 61(S1), 2069–2107. https://doi.org/10.1111/acfi.12655
Lim, W. M. (2024). What is qualitative research? An overview and guidelines. Australasian Marketing Journal, 33(2), 199–229. https://doi.org/10.1177/14413582241264619
Lurtz, M. R., Archuleta, K., Kothakota, M., & Jorgensen, T. J. (2021). A deeper dive: A mixed methods approach to risk tolerance. Financial Planning Review, 4(2), Article e1112. https://doi.org/10.1002/cfp2.1112
Marra, A. (2016). The pros and cons of fair value accounting in a globalized economy: A never ending debate. Journal of Accounting, Auditing & Finance, 31(4), 582–591. https://doi.org/10.1177/0148558X16667316
Mora, A., McGeachin, A., Barth, M. E., Barker, R., Wagenhofer, A., & Joos, P. (2019). Fair value accounting: The eternal debate – AinE EAA Symposium, may 2018. Accounting in Europe, 16(3), 237–255. https://doi.org/10.1080/17449480.2019.1664754
Migliavacca, A., Rainero, C., & Palea, V. (2021). Accounting for equity investments under IFRS 13: Are market multiple evaluations accurate? Corporate Ownership & Control, 18(4), 152–174. https://doi.org/10.22495/cocv18i4art11
Palepu, K. G., Healy, P. M., & Bernard, V. L. (2000). Business analysis and valuation: Using financial statements, text and cases (2nd ed.). South-Western College Publishing.
Ronen, J. (2008). To fair value or not to fair value: A broader perspective. Abacus, 44(2), 181–208. https://doi.org/10.1111/j.1467-6281.2008.00257.x
Roychowdhury, S., Shroff, N., & Verdi, R. S. (2019). The effects of financial reporting and disclosure on corporate investment: A review. Journal of Accounting & Economics, 68(2–3), Article 101246. https://doi.org/10.1016/j.jacceco.2019.101246
Sachan, R. K., Kumari, S., Khandelwal, V., & Kumar, T. (2024). Machine learning approach for predicting the Net Asset Value (NAV) of mutual funds based on portfolio holdings. Procedia Computer Science, 233, 154–163. https://doi.org/10.1016/j.procs.2024.03.205
Santoni, A., & Salerno, F. (2023). Financial assets valuation. In How to value a bank: From licensing to resolution (pp. 87–93). Springer. https://doi.org/10.1007/978-3-031-43872-1_8
Schmies, C. (2024). Third country relations and the equivalence regime: Treatment of collective investment schemes. European Business Organization Law Review, 25, 167–181. https://doi.org/10.1007/s40804-024-00313-w
Skalický, R., Zinecker, M., Balcerzak, A. P., Pietrzak, M. B., & Rogalska, E. (2022). Valuation of embedded options in non-marketable callable bonds: A new numerical approach. Technological and Economic Development of Economy, 28(4), 1115–1136. https://doi.org/10.3846/tede.2022.17060
Song, C. J., Thomas, W. B., & Yi, H. (2010). Value relevance of FAS No. 157 fair Value hierarchy information and the impact of corporate governance mechanisms. The Accounting Review, 85(4), 1375–1410. https://doi.org/10.2308/accr.2010.85.4.1375
The European Parliament & the Council of the European Union. (2002). Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application of international accounting standards (2002, July 19, No. 1606/2002). Official Journal, L 243. https://eur-lex.europa.eu/eli/reg/2002/1606/oj
The European Parliament & the Council of the European Union. (2009). Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (2009, July 13, No. 2009/65/EC). https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX:32009L0065
The European Parliament & the Council of the European Union. (2011). Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010 (2011, June 8, No. 2011/61/EU). Official Journal of the European Union, L 174/1. https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32011L0061
The European Parliament & the Council of the European Union. (2023). Commission Regulation (EU) 2023/1803 of 13 August 2023 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council (2023, August 13, No. 2023/1803). Official Journal of the European Union, L 237/1. https://eur-lex.europa.eu/eli/reg/2023/1803/oj
Varum, C. A., & Melo, C. (2010). Directions in scenario planning literature – a review of the past decades. Futures, 42(4), 355–369. https://doi.org/10.1016/j.futures.2009.11.021
Wack, P. (1985). Scenarios: Shooting the rapids. Harvard Business Review, 63(6), 139–150.
Wang, S., Fang, Z., & Wu, D. (2024). Internet of things-enabled tourism economic data analysis and supply chain modeling. Technological and Economic Development of Economy, 30(2), 423–440. https://doi.org/10.3846/tede.2022.17120
Whittington, G. (2008). Fair value and the IASB/FASB conceptual framework project: An alternative View. Abacus, 44(2), 139–168. https://doi.org/10.1111/j.1467-6281.2008.00255.x
Zioło, M., Spoz, A., Bąk, I., & Oesterreich, M. (2022). Fuzzy model of sustainable development with the inclusion of financial variables. Technological and Economic Development of Economy, 28(5), 1368–1391. https://doi.org/10.3846/tede.2022.17144
View article in other formats
CrossMark check
Published
Issue
Section
Copyright
Copyright (c) 2026 The Author(s). Published by Vilnius Gediminas Technical University.
License
This work is licensed under a Creative Commons Attribution 4.0 International License.