‘Annexure’

GUIDANCE NOTE FOR MEMBERS ON PROFORMA INFORMATION

Requirements of ISAE 3420 ‘Compilation of Pro Forma Financial Information Included In a Prospectus’

This ISAE deals with reasonable assurance engagements undertaken by a practitioner to report on the responsible party’s compilation of pro forma financial information included in a prospectus. The ISAE applies where:

• Such reporting is required by securities law or the regulation of the securities exchange (“relevant law or regulation”) in the jurisdiction in which the prospectus is to be issued;
• This reporting is generally accepted practice in such jurisdiction.

The purpose of pro forma financial information included in a prospectus is solely to illustrate the impact of a significant event or transaction on unadjusted financial information of the entity as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration. This is achieved by applying pro forma adjustments to the unadjusted financial information. Pro forma financial information does not represent the entity’s actual financial position, financial performance, or cash flows.

According to ISAE 3420, pro forma financial information is defined as financial information shown together with adjustments to illustrate the impact of an event or transaction on unadjusted financial information as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration. In this ISAE, it is presumed that pro forma financial information is presented in columnar format consisting of (a) the unadjusted financial information; (b) the pro forma adjustments; and (c) the resulting pro forma column.

Pro forma adjustments – In relation to unadjusted financial information, these include:

1. Adjustments to unadjusted financial information that illustrate the impact of a significant event or transaction(“event” or “transaction”)as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration; and
2. Adjustments to unadjusted financial information that are necessary for the pro forma financial information to be compiled on a basis consistent with the applicable financial reporting framework of the reporting entity (“entity”)and its accounting policies under that framework.(Ref: Para. A15–A16)

Pro forma adjustments include the relevant financial information of a business that has been, or is to be, acquired (“acquiree”),or a business that has been, or is to be, divested (“divestee”),to the extent that such information is used in compiling the pro forma financial information (“acquiree or divestee financial information”).

Salient features of ISAE 3420 are summarized below:

• Under this ISAE, the practitioner has no responsibility to compile the pro forma financial information for the entity; it rests with the responsible party. The practitioner’s sole responsibility is to report on whether the pro forma financial information has been compiled, in all material respects by the responsible party on the basis of the applicable criteria.

• This ISAE does not deal with non-assurance engagements in which the practitioner is engaged by the entity to compile its historical financial statements
• Pro forma financial information does not represent the entity’s actual financial position, financial performance or cash flows.
• This ISAE explains that a compilation of pro forma financial information involves the responsible party gathering, classifying, summarizing and presenting financial information The purpose of including pro forma financial information in a prospectus is solely to illustrate the impact of a significant event or transaction on unadjusted financial information of the entity as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration. This is achieved by applying pro forma adjustments to the unadjusted financial information.
• This ISAE explains that the professional accountant performs procedures to assess whether the applicable criteria used by the responsible party in the compilation of the pro forma financial information provide a reasonable basis for presenting the significant effects directly attributable to the event or transaction, and to obtain sufficient appropriate evidence
• This ISAE requires that the criteria used to compile the pro forma financial information meet the following at a minimum:

• The unadjusted financial information is extracted from an appropriate source.
• The pro forma adjustments are directly attributable to the event or transaction, factually supportable, and consistent with the entity’s applicable financial reporting framework and its accounting policies under that framework.
• Appropriate presentation is made and disclosures are provided to enable the intended users to understand the information conveyed.

• The practitioner shall not represent compliance with this ISAE unless the practitioner has complied with the requirements of both this ISAE and ISAE 3000’ Assurance Engagements Other than Audits or Reviews of Historical Financial Information’.
• The auditor’s responsibility is to express an opinion about whether the pro forma financial information has been compiled, in all material respects, by the management of the Company on the basis of the applicable criteria as required in para 35 of the ISAE 3420.
• This ISAE allows two alternative forms of the opinion in the professional accountant’s report, i.e.:

• The pro forma financial information has been compiled, in all material respects, on the basis of the [applicable criteria].
• The pro forma financial information has been properly compiled on the basis stated.

• This ISAE is effective for assurance reports dated on or after March 31, 2013.