ICAI issued Technical Guide on Disclosure and Reporting of KPIs in Offer Documents

The Institute of Chartered Accountants of India(ICAI) has issued Technical Guide on Disclosure and Reporting of Key Performance Indicators (KPIs) in Offer Documents.

The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018, as amended (“ICDR Regulations”) allow Key Performance Indicators (KPIs) to be disclosed under “Basis for Issue Price” section of the offer documents in case of initial public offer (IPO) in India. ICDR Regulations require issuer companies to satisfy number of conditions for disclosure of KPIs in offer documents. These include the requirement of approval of KPIs by audit committee of the issuer company. ICDR Regulations also require these KPIs to be certified by professionals (statutory auditors or chartered accountants or firm of chartered accountants or cost accountants).

KPIs are numerical measures of the issuer company’s historical financial or operational performance and financial or operational positions. Many issuer companies assert that KPIs are meaningful and provide valuable insight into the information which management considers important in running the entity’s business. Issuer companies may believe that GAAP numbers do not provide a full picture of their business or their results of operations and liquidity unless they are supplemented with other KPIs that they believe are useful. Investors, analysts and others may find KPI information useful for variety of reasons.

The Auditing and Assurance Standards Board of the Institute of Chartered Accountants of India on the request of the Securities and Exchange Board of India (SEBI) discussed the wide and increasing usage of KPIs in offer documents. The Board felt that there is a need for providing appropriate guidance to the members and other professionals who are certifying KPIs disclosed in offer documents.

It gives us immense pleasure to place in your hands this “Technical Guide on Disclosure and Reporting of Key Performance Indicators (KPIs) in Offer Documents” brought out by the Auditing and Assurance Standards Board. The Technical Guide provides detailed guidance on various aspects of disclosure of KPIs in offer documents. It also provides guidance on KPIs that can be disclosed based on different industry. Further, it provides guidance on the role and responsibility of bankers, issuer company and practitioners. The Technical Guide provides detailed guidance to the practitioners on various aspects of reporting requirements relating to KPIs including illustrative format of the report on KPIs. The Technical Guide also provides guidance to issuer companies for disclosing KPIs in offer documents as per the requirements of ICDR Regulations.

Applicability of the Technical Guide

This Technical Guide on Disclosure and Reporting of Key Performance Indicators (KPIs) in Offer Documents (“Technical Guide”) provides guidance to the practitioners in reporting requirements relating to only those Key Performance Indicators (KPIs) which have been disclosed under “Basis for Issue Price” section of the offer documents in case of initial public offer (IPO) in India in accordance with the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018, as amended (hereinafter referred to as the “ICDR Regulations”). The Technical Guide is also applicable to issuer companies for disclosing the KPIs in the offer documents as per the requirements of ICDR Regulations. The Technical Guide is applicable only to IPO as outlined in the ICDR Regulations.

The Technical Guide has been developed considering the offer or sale of the securities in India to prospective Indian investors only. The Technical Guide does not apply to offering or sale of securities outside India (including sale of securities made to prospective investors outside India (i) under Rule 144A or (ii) Regulation S of the U.S. Securities Act of 1933, as amended). The Technical Guide is applicable from the date of its issuance. The Technical Guide should be read in conjunction with the Guidance Note on Reports or Certificates for Special Purposes (Revised 2016) issued by ICAI for guidance on various aspects of such engagements including but not limited to engagement acceptance procedures, planning, materiality, written representations, etc.

The term “practitioners” refers to “Statutory Auditor” or “Independent Chartered Accountant” or “Firm of Independent Chartered Accountant” that holds a valid peer review certificate issued by the Peer Review Board of the ICAI. Accordingly, the word “Practitioners” mentioned in the Technical Guide should be read as “Statutory Auditors” or “Independent Chartered Accountants” or “Firm of Independent Chartered Accountants” that hold a valid peer review certificate issued by the Peer Review Board of the ICAI, as applicable.

To Read More Download PDF Given Below: