PDF DOWNLOADRegulatory Guide 111: Content of Expert Reports (RG 111)
RG 111 provides guidance on the contents of expert reports and explains how an expert can help security holders make informed decisions about transactions.
- RG 111 advises that an expert’s opinion should be based on reasonable grounds. An expert’s report should:
- disclose all material assumptions and reasons for the opinion; and
- justify the choice of methodologies and describe the methods used.
- An expert should use more than one valuation methodology and compare the values derived from using different methodologies to minimise the risk that the opinion is unreliable. If an expert’s valuation of a company materially differs from the price of the company’s securities prior to the announcement of a proposed transaction, the expert should comment on the difference and factors underlying it.
- An expert should not include prospective financial information (including forecasts and projections) unless an expert has made sufficient inquiries to satisfy itself that the information on which it relied was prepared on a reasonable basis. Otherwise, the opinion may be misleading. Accordingly, the discounted cash flow (DCF) methodology which invariably uses forward looking information should only be used if the expert has reasonable grounds for doing so.
- An expert should notify the party commissioning the report as soon as it becomes aware of a significant change which may affect the contents of the report or if the expert believes that a material statement in the report is misleading or deceptive.
For further details on RG 111, please click here
Regulatory Guide 112: Independence of Experts (RG 112)
RG 112 interprets and explains the requirement that an expert should be independent of the party that commissions the expert report and other interested parties. The key points from the guide are:
- The need for an expert to be, and appear to be, independent. The expert should give a genuine opinion that is the product of the expert’s professional judgment, and not mould their opinion to support the opinions of the commissioning party.
- If there are previous and existing relationships with commissioning and other interested parties which may affect the independence of an expert, the expert should consider whether it should decline the engagement or whether the conflict can be dealt with adequately by disclosure in the report.
- A commissioning party should consider the following factors in selecting an appropriate expert:
- whether the expert has sufficient expertise and resources to issue a proper report;
- the expert’s qualifications, level of technical expertise and experience;
- whether the expert has adequate resources to perform the work;
- whether the expert can meet the deadline for the report; and
- whether there are any factors which may affect the expert’s independence.
- If an expert does not have the necessary expertise on a particular matter, then the expert should engage a specialist who should report to the expert rather than the commissioning party.
- An expert should be careful to avoid any communication with the commissioning party or any other interested party which may undermine independence.
Overall, ASIC anticipates that these new regulatory guides will increase investor confidence in expert reports by enhancing the reliability, quality and independence of export reports.
For further details on RG 112, please click here
Contact details
Sydney
Darren Pereira, Partner
T: +61 (0)2 8083 0487
E:
This e-mail address is being protected from spambots. You need JavaScript enabled to view it
Melbourne
Dan Pearce, Partner
T: +61 (0)3 9321 9840
E:
This e-mail address is being protected from spambots. You need JavaScript enabled to view it
Brisbane
Philip Vickery, Partner
T: +61 (0)7 3135 0632
E:
This e-mail address is being protected from spambots. You need JavaScript enabled to view it
Disclaimer
The information in this publication is of a general nature and is not
intended to address the circumstances of any particular individual or
entity. Although we
endeavour to provide accurate and timely information, we do not
guarantee that the information in this newsletter is accurate at the
date it is received or that it will
continue to be accurate in the future.