The comment period on FASB's proposed Accounting Standards Update 2026-ED300 closes in eight days, on July 17, 2026. The proposal was published on July 1. If you manage a fund that holds restricted equity securities, particularly shares subject to post-IPO lock-up agreements, this is the most consequential FASB proposal of 2026 for your NAV calculation.
The Investment Company Institute, representing members managing $43.4 trillion in fund assets, already submitted a pre-proposal comment letter flagging specific concerns. Every fund that holds locked-up shares in recently public companies, and the ICI letter specifically cites SpaceX's accelerating IPO timeline as a high-profile example of the market dynamic driving this issue, needs to model the NAV impact before the comment deadline and decide whether to submit its own comment.
This post explains precisely what ASU 2026-ED300 proposes to change, why SpaceX makes this urgency real, how to model the NAV impact before July 17, what the ICI is already saying, what the new mandatory disclosure requires, why FASB rejected the separate liability alternative, and what a fund comment letter should contain.
What Is ASU 2026-ED300 and What Does It Change for Investment Funds?
The Financial Accounting Standards Board proposed new guidance on July 1 that would require investment funds to apply a discount when valuing shares they are contractually barred from selling. The board is accepting public comments on the proposal through July 17, 2026.
The full title is Proposed Accounting Standards Update No. 2026-ED300, Fair Value Measurement (Topic 820): Investment Companies with Equity Securities Subject to Contractual Sale Restrictions.
The problem the proposal addresses is specific and well-defined. When a company goes public, early investors, including funds that backed the company before its IPO, are typically locked into agreements preventing them from selling their shares for a set period, often 90 to 180 days. Under current accounting rules, those locked-up shares are generally valued the same as freely tradable shares, using the public market price as if the restriction did not exist.
That current treatment is governed by ASU 2022-03, which amended ASC 820 to clarify that a contractual restriction on selling an equity security is a characteristic of the holder, not of the security, and therefore does not reduce the fair value of the security for measurement purposes. The 2026 proposed ASU carves out an exception to that rule specifically for investment companies within the scope of ASC Topic 946.
Only investment funds governed by Topic 946 of US generally accepted accounting principles would be affected. Operating companies and other non-fund entities would continue under the existing framework, where a sale restriction is treated as a characteristic of the holder rather than the asset, and does not reduce fair value.
For investment companies, the proposed amendments would require them to consider a contractual sale restriction when measuring the fair value of an equity security. Investment companies also would be required to disclose the amount of the discount attributable to contractual sale restrictions.
The scope is limited to Topic 946 investment companies: mutual funds, ETFs, closed-end funds, interval funds, tender offer funds, and unit investment trusts registered under the Investment Company Act of 1940, as well as certain other entities that follow Topic 946 accounting. Operating companies are explicitly excluded.
The seven-member FASB board approved the proposal unanimously. No effective date has been set yet, with the board indicating it will make that determination after reviewing public feedback. Early adoption would be permitted once a final standard is issued.
Why SpaceX Is the Epicenter of This Problem Right Now
The ICI comment letter, published before the formal proposal, specifically cites SpaceX's accelerating IPO timeline as an example of the market dynamic that makes this proposal immediately relevant. SpaceX is the most prominent example of a late-stage private company expected to go public with a large market capitalisation, after which early investors in venture funds and other investment vehicles would hold post-IPO lock-up positions.
The SpaceX example is not unique in structure. FASB acknowledged the problem has grown more pressing as companies wait longer to go public and arrive at public markets with larger valuations, making post-IPO lock-up periods economically weightier than they once were.
The combination of larger valuations and longer private-to-public timelines means that the difference between the quoted price of freely tradable shares and the value of locked-up shares is more material than it was when ASU 2022-03 was adopted. A fund with a $500 million position in a newly public company, locked up for 180 days, is in a materially different economic position from a fund with a $5 million position locked up for 90 days. The 2022 rule did not differentiate between those situations. The 2026 proposal does.
Under ASU 2022-03, where a fund holds shares that are economically constrained by a contractual lockup, the fund must measure those shares by reference to the quoted price of unrestricted shares, even though the fund cannot monetize the restricted shares.
The ICI's concern is that this mismatch creates a real economic harm. If a fund must value restricted public shares without considering the economic impact of a contractual lockup, its NAV may be overstated. If NAV is overstated, redeeming shareholders are paid too much, at the expense of purchasing and remaining shareholders.
SpaceX, when it goes public, will likely be one of the largest IPOs in market history. Funds that hold SpaceX shares and will be subject to post-IPO lock-ups need to understand how the proposed ASU, if finalised, would affect their NAV calculation from the date of the IPO through the lock-up expiration.
How Much Would a Mandatory Lock-Up Discount Actually Reduce Your NAV?
The proposal requires funds to apply a discount when valuing locked-up shares, but FASB has not specified a prescribed discount rate or methodology. The discount is measured under the fair value framework of ASC 820: what would a market participant pay for the locked-up shares as of the measurement date?
The relevant academic and market practice literature on restricted share discounts, sometimes called the discount for lack of marketability (DLOM) in the context of closely held companies but applied to lock-up situations for public shares, identifies several approaches to quantifying the discount.
The put option model is the most theoretically grounded approach for short-term lock-up restrictions on publicly traded shares. The restriction on selling a share for a fixed period is economically equivalent to having sold a put option on the share: you have given up the ability to sell at today's price and must wait until the lock-up expires. The put option can be priced using standard option pricing models (Black-Scholes or similar), using the following inputs: the current share price, the lock-up expiration date, the stock's volatility, and the risk-free interest rate. The discount is the value of the forgone put option expressed as a percentage of the current share price.
For a company with high stock price volatility (common for recent IPOs) and a long lock-up period (180 days), the put option model produces larger discounts than for a low-volatility company with a short lock-up. Academic studies on the magnitude of empirically observed IPO lock-up discounts, derived from comparing the trading price of shares immediately before and after lock-up expiration, generally produce estimated discounts in the range of 4% to 20%, with the range depending on volatility and lock-up duration.
For a fund with a $100 million locked-up position in a high-volatility recently public company with a 180-day lock-up:
A 10% discount reduces the position's NAV contribution by $10 million. A 15% discount reduces it by $15 million.
For a fund where the locked-up position represents 5% of total NAV, a 15% discount on that position reduces total fund NAV by approximately 75 basis points. For a fund where the locked-up position is 20% of NAV, the same 15% discount reduces total NAV by 300 basis points.
Those are material amounts from a shareholder dilution and performance fee perspective.
What Is the ICI Saying in Its Comment Letters and Why It Matters
The Investment Company Institute (ICI) is the leading association representing the asset management industry in service of individual investors. ICI's members include mutual funds, exchange-traded funds (ETFs), closed-end funds, and unit investment trusts (UITs) in the United States, and UCITS and similar funds offered to investors in other jurisdictions. Its members manage $43.4 trillion invested in funds registered under the US Investment Company Act of 1940, serving more than 125 million investors.
The ICI's pre-proposal letter supported FASB's decision to revisit the guidance for investment companies but raised specific concerns about implementation.
The central ICI concern is the interaction between the proposed ASU and existing regulatory frameworks. A fund's board or valuation designee is required to determine fair value in good faith and to manage valuation risks, including risks that may result in shareholder dilution. The SEC's Good Faith Fair Value rule (Rule 2a-5 under the Investment Company Act) already requires funds to account for all factors that would affect fair value, which many funds and their boards and valuation designees have interpreted as requiring consideration of lock-up restrictions in some form. The question is whether the proposed ASU's mandatory discount framework is consistent with or duplicative of those existing regulatory obligations.
The ICI also raised concerns about the methodology for measuring the discount, specifically whether all funds will apply a consistent and comparable approach or whether different valuation methodologies will produce different discounts for the same economic restriction, potentially recreating the diversity in practice that the proposed ASU is intended to reduce.
While investors in listed closed-end funds and ETFs transact at market prices, those funds still calculate a NAV, which informs the funds' market prices. This is relevant because the proposed discount requirement would reduce the NAV used as a reference for market price formation in closed-end funds and ETFs, with potential market pricing implications beyond the fund's own internal calculations.
The ICI letter's significance for individual fund comment submissions is that it establishes the industry-level position. Fund CFOs and their counsel can build on the ICI's framework by providing fund-specific data: the magnitude of their restricted equity positions, the specific lock-up terms they hold, and the quantified NAV impact they would experience from the proposed mandatory discount approach.
What Are the Three Questions Every Fund CFO Must Model Before July 17?
The comment period closes in eight days. A fund comment letter without supporting quantitative analysis is less effective than one grounded in actual portfolio data. Three specific modeling exercises should be completed before submitting.
Question 1: How large is your restricted equity position as a percentage of NAV?
Pull every equity security in the portfolio that is subject to a contractual sale restriction as of today. Restrictions to include: post-IPO lock-up agreements, market standoff agreements arising from secondary transactions, contractual lock-ups imposed by the issuer on early investors, and registration rights agreements with lock-up components.
For each restricted position, calculate the current fair value using the quoted public market price (the current ASU 2022-03 methodology) and express it as a percentage of total fund NAV. The aggregate of all restricted positions as a percentage of NAV is the first key number.
Question 2: What discount would a market participant apply to your lock-up term?
For each material restricted position, identify the remaining lock-up period in days. Apply a put option model or a comparable market participant methodology to estimate the implied discount for the remaining lock-up period, using the stock's current volatility (implied volatility from listed options if available, historical volatility otherwise) and the risk-free rate.
The result is a position-specific discount percentage for each restricted equity security. Multiply that discount by the current fair value of each position to arrive at the dollar amount of NAV reduction for that position. Sum across all restricted positions for the total expected fund NAV reduction.
Question 3: How does the discount change your management fee and performance fee calculations?
Management fees are typically calculated as a percentage of NAV or net assets. A reduction in NAV from mandatory lock-up discounts reduces the fee base. Calculate the annual management fee reduction for each assumed discount percentage.
Performance fees (carried interest or incentive fees) are more complex: many performance fee structures are calculated on unrealised gains, and a mandatory NAV discount would reduce the unrealised gain on restricted positions. For funds with high-watermark-based performance fees, a mandatory discount that reduces NAV below the prior high-watermark may defer or eliminate performance fee accruals until the discount reverses upon lock-up expiration.
Quantify both effects. The comment letter should present these as specific economic consequences of the proposed approach, grounded in the fund's actual structure.
What New Disclosures Would Be Required: The Mandatory Restriction Discount Amount
Investment companies also would be required to disclose the amount of the discount attributable to contractual sale restrictions.
This mandatory disclosure requirement is a new obligation that would not exist under current ASU 2022-03 guidance. Under the proposed ASU, for every period in which the fund holds restricted equity securities, the financial statements must disclose the total dollar amount by which the fair value of restricted securities was reduced from the unrestricted quoted price.
The disclosure structure mirrors the disaggregated fair value hierarchy disclosures already required under ASC 820: funds would need to present the restricted equity securities separately from unrestricted securities, show the unrestricted quoted price, show the discount applied, and show the resulting discounted fair value.
This disclosure changes the information investors receive. Under current rules, a fund holding $500 million of locked-up SpaceX shares (hypothetically) at the IPO price presents those shares at full quoted market value, and investors see the $500 million position on the same basis as freely tradable shares. Under the proposed ASU, investors would see both the $500 million unrestricted value and the discounted value, with the difference attributable to the lock-up explicitly disclosed.
For investor communications purposes, the mandatory discount disclosure also changes how fund managers explain NAV movements. A fund whose NAV declines by 200 basis points because of lock-up discounts on a newly public position will need to specifically attribute that decline to the accounting change rather than to market price movements, in quarterly and annual reports and in investor letters.
Why FASB Rejected the "Separate Liability" Alternative and What That Means for You
The FASB considered two approaches before selecting the mandatory discount to the asset's fair value.
The alternative that was rejected was recording a separate liability for the restriction rather than reducing the asset's fair value. Under that approach, the equity security would continue to be measured at the full unrestricted quoted price (as under current ASU 2022-03), but the fund would also record a separate liability equal to the estimated cost of the restriction, reducing net assets but leaving the gross asset value unchanged.
The board also ruled out an alternative that would have required funds to record a separate liability for the restriction rather than adjusting the asset's fair value. FASB concluded that the separate liability approach would be inconsistent with the conceptual framework of ASC 820, which measures the exit price of the asset as of the measurement date. A market participant purchasing the locked-up shares would pay less than the unrestricted market price for those shares, so the exit price of the asset itself is lower, not the exit price plus a separate associated liability.
The rejection of the separate liability approach has a practical consequence for fund financial statement presentation. The proposed approach reduces the fair value of the asset on the balance sheet (investments are carried at the discounted amount). The rejected approach would have left the asset at full value and created a new liability line on the balance sheet.
From a NAV perspective, both approaches produce the same net result: the fund's net assets are reduced by the discount amount. But from a gross asset presentation perspective, the proposed approach produces lower reported investment assets, while the separate liability approach would have produced higher reported investment assets and a new liability. For funds that are tracked on a gross asset basis for certain regulatory or investor reporting purposes, the distinction matters.
What Should Your Fund Submit in Its Comment Letter?
A fund comment letter on a FASB proposed ASU does not need to follow a prescribed format, but the most effective comment letters in FASB's public record combine a clear position with quantitative support and specific technical questions or concerns. Eight days is enough time to complete a letter if the portfolio modeling described above is done first.
The comment letter should address six elements.
Statement of position. Does the fund support the proposed ASU, support it with modifications, or oppose it? The ICI's pre-proposal letter supported FASB's decision to reconsider ASU 2022-03 for investment companies while raising implementation concerns. An individual fund can endorse that position or take a more specific stance.
Portfolio impact quantification. Using the modeling from Question 1, 2, and 3 above, disclose the aggregate magnitude of the proposed ASU's impact on the fund's NAV. A statement that the proposed ASU would reduce the fund's NAV by approximately X basis points based on current restricted equity positions and estimated discount rates provides the FASB board with concrete data about the economic consequences of the proposal.
Methodology concerns. If the fund has concerns about the consistency of discount methodologies across funds, the comment should identify those concerns. The absence of prescribed discount methodology in the proposed ASU means different funds will apply different approaches to the same restricted security, potentially producing different discounts for identical economic restrictions. If the fund believes FASB should prescribe a methodology (such as the put option model), say so and explain why.
Effective date and transition request. No effective date has been set yet, with the board indicating it will make that determination after reviewing public feedback. The comment letter is an appropriate vehicle for requesting a specific minimum implementation period, identifying the system and process changes required to implement daily discount calculations for positions with varying lock-up terms, and requesting retrospective versus prospective transition guidance.
ETF and daily NAV calculation concerns. Mutual funds and ETFs sell and redeem their shares daily at NAV, and interval funds and tender offer funds also transact with their shareholders at NAV, albeit less frequently. If your fund calculates daily NAV and holds restricted positions, the comment should address the operational feasibility of daily discount recalculation and whether the proposed disclosure can be produced daily or only periodically.
Comment submission instructions. Comments should be submitted through the FASB website at fasb.org by July 17, 2026. The comment letter should reference Proposed ASU 2026-ED300 and Topic 820 in the subject line. The public comment period on the proposed taxonomy update ends on July 17, 2026. Comments should be submitted directly to the FASB.
Frequently Asked Questions
What is FASB proposed ASU 2026-ED300?
Proposed Accounting Standards Update 2026-ED300, Fair Value Measurement (Topic 820): Investment Companies with Equity Securities Subject to Contractual Sale Restrictions, is a FASB proposal published July 1, 2026, that would require investment companies within the scope of ASC Topic 946 to apply a discount when measuring the fair value of equity securities subject to contractual sale restrictions such as post-IPO lock-up agreements. Under current ASU 2022-03, those restricted shares are valued at the unrestricted quoted market price. The comment deadline is July 17, 2026.
Does the lock-up discount apply to all investment funds or only Topic 946?
Only investment companies within the scope of ASC Topic 946, which includes US-registered mutual funds, ETFs, closed-end funds, interval funds, tender offer funds, and unit investment trusts, as well as other entities following Topic 946 accounting. Operating companies are explicitly excluded. The 2022 rule (ASU 2022-03) that prohibits considering restrictions when measuring fair value continues to apply to operating companies and all other entities outside Topic 946.
How does a SpaceX lock-up get discounted under the proposed ASU?
When SpaceX goes public and fund investors are subject to a post-IPO lock-up agreement, those locked-up shares would be measured at a discount to the unrestricted quoted market price. The discount reflects what a market participant would pay for the economically constrained shares, specifically the inability to sell for the remaining lock-up period. The discount is calculated using a market participant methodology such as a put option model, taking inputs of the current share price, remaining lock-up term, stock volatility, and the risk-free rate.
What is the comment deadline for ASU 2026-ED300?
July 17, 2026. Comments should be submitted through the FASB website at fasb.org, referencing Proposed ASU 2026-ED300 and Topic 820. The FASB also issued a proposed taxonomy update related to this proposal, with the same July 17, 2026 comment deadline.
Does the proposed ASU affect ETFs and mutual funds that calculate daily NAV?
Yes. ETFs and mutual funds that hold restricted equity securities and calculate daily NAV would need to recalculate the lock-up discount as of each daily measurement date throughout the lock-up period. The discount changes as the remaining lock-up term shortens and as the underlying stock's volatility changes. The operational complexity of daily discount recalculation for daily-NAV funds is one of the specific concerns the ICI raised in its pre-proposal comment letter.
Key Takeaways
- FASB published Proposed ASU 2026-ED300 on July 1, 2026, proposing to require investment companies within the scope of ASC Topic 946 to apply a discount when measuring the fair value of equity securities subject to contractual sale restrictions such as post-IPO lock-ups. The comment deadline is July 17, 2026, eight days from today.
- Under current ASU 2022-03, a contractual sale restriction is a characteristic of the holder, not the asset, and does not reduce fair value. The proposed ASU carves out an exception specifically for Topic 946 investment companies, requiring those funds to discount restricted shares to the price a market participant would pay for the economically constrained position.
- The proposal was approved unanimously by the seven-member FASB board. No effective date has been set. Early adoption will be permitted once a final standard is issued.
- The ICI, representing members managing $43.4 trillion in fund assets and serving more than 125 million investors, submitted a pre-proposal comment letter supporting FASB's reconsideration while raising concerns about methodology consistency and operational feasibility for daily-NAV funds.
- The mandatory new disclosure requires funds to present the dollar amount of the discount attributable to contractual sale restrictions. This changes how investors see restricted equity positions on the fund's balance sheet.
- FASB rejected the alternative separate liability approach, concluding that the exit price of the restricted asset is itself lower than the unrestricted market price. Both approaches produce the same net NAV impact but different gross asset presentations.
- Fund CFOs should model three items before July 17: the aggregate restricted equity position as a percentage of NAV, the implied discount for each position using a put option or comparable methodology, and the management fee and performance fee impact of the resulting NAV reduction. That quantitative analysis is the foundation of an effective comment letter.
