Entities with interests in alternative investments, like hedge funds or private equity, may be finding it tough to pin a value on those investments for financial reporting purposes, so the American Institute of Certified Public Accountants is trying to help.

AICPA’s Accounting Standards Executive Committee is working on a paper regarding how to apply Financial Accounting Statement No. 157, Fair Value Measurements, to alternative investments that are thinly traded even in the best of times, but now likely are caught in the liquidity freeze. The committee has published a first draft and is looking for feedback.

Pension plan sponsors in particular have become more heavily invested in alternative investments, said Jay Hanson, chairman of AcSEC and a partner for McGladrey & Pullen, looking for better returns to make up lost ground in recent years. Given the ongoing, heated controversy over applying FAS 157 when market values have plunged and financial instruments are stagnant, the committee decided to seek comments on the draft before committing it to final publication, said Hanson.

The guidance reminds entities they need to do more than publish the net asset values provided by fund managers in disclosing the fair value of their investments, said Hanson. “The past practice of valuing these investments at net asset value doesn’t exactly fit into the framework of FAS 157,” he said. “FAS 157 says if you sold the investment today to a market participant, how much would you get for it?”

Net asset values equal the value of assets less liabilities, and they’re typically established by fund managers in relation to specific investor trades. Trading even during peak market activity often is restricted by the terms of the investment, and pricing is rarely published, so there’s no visible market pricing to help establish values. Hanson said investors reporting their holdings in such investments may end up arriving at the net asset value as the FAS 157 value, “but you have to go through a lot more work to figure that out.”

AcSEC is accepting comments on its proposed guidance through Feb. 27.