Carried Interest Modelling Services

PE Accounting Insights

Carried Interest Modelling Services

Carried Interest Modelling is a new service tailored to the specific needs of each client. The service involves the following steps:

Thorough analysis and careful interpretation of the Limited Partnership Agreement (LPA), particularly the waterfall clauses and their interaction with other parts of the LPA. That involves a process of close cooperation between the PEAI consultants, the GP/sponsor of the fund, lawyers and tax advisers who structured the carried interest arrangement and the auditors who will be signing off the model. That initial step is critical to the process with many models being flawed because of the lack of a full understanding of not only the waterfall mechanics, but also of the original intended effect of the carried interest model as an incentive mechanism and its tax implications

  • Designing a mathematical model involving, depending on the complexities of the model, experienced PEAI consultants who understand the mechanics of a PE fund and your fund specific terms, carried interest experts, mathematicians and analysts with Excel modelling skills
  • Testing the model for different scenarios (scenario testing) and making it future-proof
  • Providing a suggested accounting treatment and presentation in the financial statements agreed with the auditors and tax advisers
  • Leading the process of signing off (by the client and auditors) the carry model and making sure that all the parties involved agree with it