• OFS-3.4 OFS-3.4 Role and Responsibilities of Auditor and Independent Reporting Accountant on Financial Projections

    • OFS-3.4.1

      Newly-established issuers or small and medium enterprises who cannot provide financial statements, or historical records must include projected financial statements in the prospectus or offering document.

      January 2014

    • OFS-3.4.2

      Other than for newly-established issuers, financial projections, forecasts, or estimates of future operating results are not required to be included in offering documents, unless otherwise stated in this Module or by the CBB. However, if the issuer decides to disclose such information, it has to justify its projections adequately. The issuer should provide an explanation as to how the projections were calculated, taking into account all assumptions and risks.

      January 2014

    • OFS-3.4.3

      Where the projections of financial statements, or forecasted financial information are disclosed in the prospectus or offering document, the projections must be reviewed and reported on by an independent reporting accountant or other expert and such report must be set out in the offering document, in accordance with the International Standards on Assurance Engagement (ISAE), or any other applicable international standards required from time-to-time and the declaration required under Paragraph OFS-3.2.24 must be in line with this standard.

      January 2014

    • OFS-3.4.4

      The issuer, lead manager and the independent reporting accountant must ensure that sufficient details on the bases and assumptions of the projections are disclosed to enable the investor to assess the reliability of the projections and the effect of any changes to the assumptions used. The bases and assumptions must:

      (a) Provide useful information to investors to assist them in forming a view as to the reasonableness and reliability of the projections;
      (b) Draw the investors' attention to, and where possible quantify, those uncertain factors which could materially affect the achievement of the projections;
      (c) Avoid generalisations and all-embracing assumptions (general asumptions, where applicable, could be made) and those relating to the general accuracy of the projections; and
      (d) Be clearly stated and reviewed for reasonableness by the directors who are responsible for the projections, bases and assumptions.
      January 2014

    • OFS-3.4.5

      The following requirements are applicable in respect of profit/cash flow projections:

      (a) The projections must be realistic and achievable to provide investors with information on the issuer's prospects;
      (b) The projections must be compiled with utmost care and objectivity; and
      (c) Where the projections are subject to high probability of variation, the issuer must provide a sensitivity analysis based on any one of the key variables such as sales price, volume of sales, production costs, production capacity, operating expenses and financing costs.
      January 2014

    • OFS-3.4.6

      In addition to the above, owing to the specific nature of profit/cash flow projections, the issuer must take note of the following:

      (a) A projection, being a representation of financial information based on a set of assumptions which are uncertain and hypothetical, must be qualified as to its achievability for those reasons;
      (b) The qualifications of projected financial information must draw attention to the fact that the presentation is based on hypothetical assumptions, and that actual events may differ from those assumed and may materially affect the financial information projected; and
      (c) Notwithstanding the uncertainties and hypothetical assumptions associated with projections, the projections must be prepared with care, skill and objectivity so as to represent the stated assumptions and not to purport unreasonable hypotheses and assumptions.
      Amended: July 2018
      January 2014

    • Eligibility

      • OFS-3.4.7

        The independent reporting accountant is required to adhere to the independence and other standards applicable to auditors, in addition to the general eligibility under Section OFS-3.2.

        January 2014