This guide will benefit members of ICAI and practitioners to comply with The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 (“ICDR Regulations”) which mandates the disclosure of Key Performance Indicators (KPIs) in the offer document by the issuer company under heading ‘Basis for Issue Price’. It also requires KPIs disclosed shall be approved by the Audit Committee and before such disclosure also certified by the Statutory Auditor(s) or Chartered Accountants or firm of Chartered Accountants. To provide guidance on the above matters the Auditing and Assurance Standards Board of ICAI has released the Technical Guide on disclosure and reporting of KPIs in offer documents.
1. Meaning of KPIs
KPIs are numerical measures of the issuer company’s historical financial or operational performance and financial or operational positions and can be broadly classified into the following categories:
a) GAAP Financial Measures
b) Non-GAAP Financial Measures
c) Non-Financial measures (part of financial reporting)
d) Operational measures (not part of financial reporting)
2. Disclosure of KPIs in Offer Documents
An issuer company should provide disclosures that clearly demonstrate:
i) the definition of KPIs and the basis of their calculation
ii) the usefulness of the KPIs to investors and other stakeholders
iii) the additional purposes for which management uses such measures (e.g., for incentive and compensation arrangements, to manage its business, to allocate resources, or as a debt covenant)
3. Liability for Misstatement in Prospectus
Every person who authorises the issue of the prospectus is liable to pay compensation to every person who subscribes for securities on the faith of the prospectus, for any loss or damage that the latter may have sustained by reason of any untrue statement included therein. However, a chartered accountant giving his consent shall be liable only in respect of an untrue statement, if any, made by him in his capacity as an expert.
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