Under point 1 of Annex II to the PD Regulation, pro forma financial information must be accompanied by an introductory text that describes. The reporting auditor obtains an understanding of the transaction for which the pro forma financial information is being prepared by discussion with the management or management of the issuer and by reading relevant supporting documentation. Other matters for consideration by the reporting auditor include the availability of evidence to provide factual support for the proposed adjustments and the accounting policies that will form the basis of the adjustments to the pro forma financial information.
Matters are material if their omission or misstatement could, individually or in the aggregate, affect the economic decisions of the intended users of the preliminary financial information. A misstatement in the context of the collection of pro forma financial information includes, for example: The reporting accountant verifies the acquisition of unadjusted financial information from the relevant source.
The reporting accountant ascertains whether the adjustments made in the pro forma financial information are included under the appropriate financial statement caption, as well as the arithmetical accuracy of the calculations within the pro forma financial information itself. The reporting accountant must evaluate whether the adjustments made to the unadjusted financial information are in accordance with the accounting policy to be adopted in the last, or in the next, financial statements of the entity presenting the pro forma financial information .
Documentation
The Reporting Auditor should determine whether he has become aware of anything that causes him to believe that the pro forma financial information is presented in a manner that is incomprehensible or misleading in the context in which it is provided. If the Reporting Auditor becomes aware of such matters, he should discuss them with the parties responsible for the pro forma financial information and those to whom his report is addressed, and see whether he can issue his report. The Reporting Auditor reads the pro forma financial information to assess whether:. a) as required by point 1 of Annex II of the PD Regulation, the pro forma financial information includes a description of the transaction, the companies or entities involved and the period to which it relates, and clearly states the purpose for which it is prepared for illustrative purposes only and that, by its nature, it addresses a hypothetical situation and therefore does not reflect the actual financial position or results of the Company;.
Professional scepticism
Reporting
In all reports on pro forma financial information in investment circulars, the Reporting Auditor shall explain the extent of his responsibility with respect to the pro forma financial information by including in his report:. a) A statement that it is the responsibility of the Reporting Auditor to form an opinion (as required by applicable legal requirements) on the appropriate compilation of the pro forma financial information and to report its opinion to the addressees of the report; And. b) a statement that the pro forma financial information is the responsibility of the directors. The responsibility of the Reporting Auditor with regard to the opinion required by the PD Regulation is limited to providing the report and the opinion expressed. The Reporting Auditor shall include a chapter on the preparation of reporting that cross-references notes that explain the basis for the preparation of the pro forma financial information.
It will be made clear in the section on the preparation of the report whether the accounting policies applied in preparing the pro forma information are those applied by the entity in preparing the last published financial statements or those applied by the entity. it intends to apply in the next published financial statements. The report on the pro forma financial information must contain a clear statement of opinion that complies with applicable regulatory requirements. In forming its opinion, the Reporting Auditor considers events of which the Reporting Auditor has become aware up to the date the Reporting Auditor signs the report that affect the opinion expressed in the report.
In rendering the opinion required by the PD Regulation, the reporting accountant does not provide any assurance regarding any source financial information on which the pro forma financial information is based beyond that opinion. In particular, the reporting accountant is not restating or updating any opinion he may have given in any other capacity on that source financial information. The investment circular in which the reporting accountant's report is included may be made available in other countries, such as the United States of America, which have their own standards for accountants when reporting on pro forma financial information.
An example of such a reference is included in the sample report in Appendix 5 of this SIR.
Modified opinions
Consent
Events occurring between the date of the reporting accountant’s report and the completion date of the transaction
If, as a result of discussions with those responsible for the investment circular regarding an event that occurred prior to the closing date of the transaction, the Reporting Auditor is uncertain or disagrees with the proposed course of action, the Reporting Auditor may consider it necessary to seek legal advice with regarding his responsibilities in the specific circumstances. After the date of its report, the Reporting Auditor has no obligation to perform procedures or make inquiries with respect to the investment circular.
Effective date
Para88 Proforma adjustments relating to the proforma financial information must: c) be factually supportable.6 ‘‘Factually supportable’’. The nature of the facts supporting an adjustment will vary depending on the circumstances. Nevertheless, it is expected that facts will be able to end a reasonably accountable degree of a typical accountability of a typical public management. accounts, other financial information and valuations contained in the document, purchase and sale agreements and other agreements for the transaction covered by the prospectus. APPENDIX 2 OTHER REGULATORY PROVISIONS RELEVANT TO THE PREPARERS OF PRO FORMA FINANCIAL INFORMATION PDRegulationAnnex of PDRegulationAnnex II of PDRegulationCESR recommendations (9) Proforma financial information is required in case of significant major change in more than 2% or more 2% or more. It is of the issuer's business, in the situation of an issuer as a result of a particular transaction, with the exception of those situations where merger accounting is required. The sample engagement letter clauses are intended for consideration in the context of a public reporting engagement on pro forma financial information.
They should be adapted to the particular circumstances and supplemented by other relevant and relevant clauses.
Financial information upon which the report is to be given
Responsibilities
Scope of work
The following are examples of management presentation letter clauses relating to a preliminary financial information report issued pursuant to the PD Regulation or the Listing Rules, which can be obtained from the issuer.
Introduction
Specific representations
The accounting policies used in the compilation of the pro forma financial information are those that the Company will adopt in subsequent financial statements, and all necessary changes have been made to reflect those policies.]. EXAMPLE OF A PROFORMA FINANCIAL INFORMATION REPORT IN ACCORDANCE WITH THE PD REGULATION OR RULES FOR COMBAT. We report the preliminary [financial information] (“prospected financial information”) set out in part [..] of the [Investment Circular] dated..., which was prepared on the basis described [in note x], for illustrative purposes only , to provide information on how the [transaction] may affect the financial information presented on the basis of the accounting policies [adopted/to be adopted1] by ABC plc in the preparation of the financial statements for the period [end/end] [date].
The directors of ABC plc are responsible for the preparation of pro forma financial information in accordance with [paragraph 20.2 of Schedule I of the PD Regulation] [guidelines issued by the London Stock Exchange]. It is our responsibility to form an opinion, as required by [paragraph 7 of Schedule II of the PD Regulation] [guidelines issued by the London Stock Exchange], on the appropriateness of the collection of pro forma financial information and to communicate that opinion to you. In providing this opinion, we are not updating or refreshing any reports or opinions previously prepared by us regarding any financial information used in the compilation of the pro forma financial information, nor are we assuming any responsibility for such reports or opinions, other than that owed to those who we considered these reports or opinions as of the dates they were issued.
The work we performed for the purpose of preparing this report, which did not involve any independent examination of any of the underlying financial information, consisted primarily of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments and discussing the pro forma . financial information with the directors of ABC plc. We planned and performed our work to obtain the information and explanations we considered necessary to provide us with reasonable assurance that the pro forma financial information has been correctly prepared on the basis stated and that such basis is consistent with accounting practice in ABC plc. This section may be omitted if the document is not to be distributed outside the UK - Our work has not been carried out in accordance with auditing or other standards and practices generally accepted in the US [or other jurisdictions] and therefore should not be relied upon as having been carried out in accordance with these standards and practices.]. a) the pro forma financial information has been correctly compiled on the basis stated; and (b) such basis is consistent with ABC plc's accounting policies.
SECTIONS OF TECH 18/98 ‘‘PROFORMA FINANCIAL INFORMATION – GUIDANCE FOR PREPARERS UNDER THE LISTING RULES’’1 (ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF ENGLAND & WALES), WHICH REMAINS ELEVANT. 6 Principles that still apply, except that under clause 20.2 of Schedule I to the PD Regulation, the inclusion of pro forma information is now normally included where there has been one. This pro forma financial information shall be presented as set out in Annex II and shall include the information set out therein.
Pro forma financial information must be accompanied by a report prepared by independent accountants or auditors. 12 to 19 Principles still apply except that there is no express requirement under the PD regulation that all applicable adjustments must be included, nor that the pro forma financial information must not be misleading. The sources of the pro forma financial information must be stated and, if applicable, the financial statements of the acquired businesses or entities must be included in the prospectus.
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INVESTMENT REPORTING STANDARDS APPLICABLE TO PUBLIC REPORTING
