Blog4 min # The Fair Value Reckoning: Why Cost-Based Valuations Are Becoming a Governance Risk For many private credit managers, marking loans at cost was once a practical approach. In a low-rate environment with relatively stable credit markets, the difference between cost and fair value was often immaterial, making the operational trade-off easy to justify. That… ![The Fair Value Reckoning: Why Cost-Based Valuations Are Becoming a Governance Risk](https://cdn.sanity.io/images/0lkfsbau/production/75d74335cdf87d45d1fc854e9ce68b6d30eb8272-800x418.png?q=80&fit=max&auto=format&w=3840) [Cost-Based Marks Create Growing Governance Challenges](#cost-based-marks-create-growing-governance-challenges)[LP Expectations Have Changed](#lp-expectations-have-changed)[Fair Value Depends on Trusted Data](#fair-value-depends-on-trusted-data)[Building Defensible Valuations Through Connected Intelligence](#building-defensible-valuations-through-connected-intelligence)[Fair Value Is No Longer Just an Accounting Exercise](#fair-value-is-no-longer-just-an-accounting-exercise)[Is Your Fair Value Process Built to Withstand Scrutiny?](#is-your-fair-value-process-built-to-withstand-scrutiny) Published 24 August 2026 Explore with ChatGPT - [Key takeaways](https://chatgpt.com/?hints=search&q=What%20are%20the%20key%20takeaways%20from%20https%3A%2F%2F73strings.bytogether.agency%2Fllm%2Finsights%2Fblog%2Fthe-fair-value-reckoning-why-cost-based-valuations-are-becoming-a-governance-risk-22) - 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In a low-rate environment with relatively stable credit markets, the difference between cost and fair value was often immaterial, making the operational trade-off easy to justify. That assumption no longer holds. Today’s market is defined by higher interest rates, wider credit spreads, and greater dispersion in borrower performance. At the same time, Limited Partners are asking more detailed questions about individual holdings, auditors are increasing scrutiny around valuation support, and regulators continue to reinforce expectations around fair value governance. For CFOs and Heads of Valuations, the challenge is no longer simply producing a quarterly mark. It is demonstrating that every valuation reflects current market conditions and can withstand investor, auditor, and regulatory scrutiny. ## **Cost-Based Marks Create Growing Governance Challenges** A valuation recorded at cost may still satisfy historical accounting practices in certain circumstances. However, relying on cost as the default starting point creates increasing governance challenges as market conditions evolve. The issue is not whether valuations move every quarter. The issue is whether firms can demonstrate that they have assessed fair value using current information and documented the rationale behind every conclusion. As private credit portfolios grow and become more complex, that expectation becomes increasingly difficult to meet through manual processes and fragmented data. For finance and valuation leaders, confidence comes from consistency, transparency, and evidence, not assumptions. ## **LP Expectations Have Changed** Investor reporting has evolved well beyond high-level fund summaries. Today, LPs increasingly expect transparency into individual portfolio companies, valuation methodologies, key assumptions, and the factors driving changes in value. They want confidence that reported marks reflect current market conditions rather than historical carrying values. This shift places greater pressure on finance and valuation teams to deliver valuations that are repeatable, well documented, and supported by trusted data. The conversation is no longer simply about performance. It is about demonstrating a robust valuation process. ## **Fair Value Depends on Trusted Data** Producing fair value marks at scale requires more than sophisticated valuation models. Borrower financial statements, covenant reports, lender updates, operating metrics, and supporting documentation are often dispersed across PDFs, spreadsheets, emails, and third-party systems. Before valuation teams can analyze a portfolio, they must first locate, validate, and structure the underlying information. Without a trusted data foundation, valuation processes become increasingly manual, difficult to scale, and harder to defend during audits or LP reviews. ## **Building Defensible Valuations Through Connected Intelligence** For CFOs and Heads of Valuations, improving valuation governance starts with improving data quality. [73 Intelligence](https://hubs.li/Q04s8ywL0), the only end-to-end AI-powered platform that connects the three capabilities required for modern private credit valuations: - **Data Extraction (73 Extract):** Transform unstructured borrower and portfolio documents into structured, labeled, audit-ready data with up to **99% extraction accuracy**, creating a trusted data foundation for valuation teams. - **Portfolio Monitoring (73 Monitor):** Continuously monitor borrower performance through automated covenant tracking, anomaly detection, and real-time portfolio intelligence so valuation teams can identify material changes as they occur. - **Valuations (73 Value):** Deliver deterministic, audit-ready valuations with complete traceability from source data to the final mark, supported by advanced analytics, scenario analysis, and governance designed for institutional investors. By connecting trusted data, continuous portfolio monitoring, and valuation workflows, [73 Intelligence](https://hubs.li/Q04s8ywL0) enables firms to improve efficiency while strengthening governance, transparency, and confidence across the valuation process. ## **Fair Value Is No Longer Just an Accounting Exercise** The firms that will lead the next phase of private credit will not simply produce fair value marks. They will demonstrate a valuation process that is transparent, repeatable, and defensible. For CFOs and Heads of Valuations, that means moving beyond historical cost and building a valuation framework grounded in trusted data, robust governance, and audit-ready evidence. Fair value is no longer just a reporting requirement. It has become a measure of operational maturity. ## **Is Your Fair Value Process Built to Withstand Scrutiny?** Fair value is becoming a test of more than valuation methodology, it is a test of data quality, governance, and operational discipline. 73 Intelligence helps private credit managers build a more defensible valuation process by connecting trusted portfolio data, continuous monitoring, and audit-ready valuations in one platform. With complete traceability from source data to final mark, your team can respond to LP, auditor, and regulatory scrutiny with greater confidence. [******Book a demo to see how 73 Intelligence can strengthen your fair value process →******](https://hubs.li/Q04tkK4H0)