The Institute of Chartered Accountants of India (ICAI) has released the first edition of their “Technical Guide on Disclosure and Reporting of Key Performance Indicators (KPIs) in Offer Documents”.
ICAI’s Technical Guide on Disclosure and Reporting of Key Performance Indicators (KPIs) in Offer Documents (April 2023)
This article provides an overview of the guide, its applicability, and the requirements for disclosing KPIs in offer documents according to the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 (“ICDR Regulations”).
The Importance of KPIs in Offer Documents
KPIs are numerical measures of an issuer company’s historical financial or operational performance and financial or operational positions. They provide valuable insights into the information that management considers important for running a business. Investors, analysts, and other stakeholders may find KPI information useful for various reasons. The ICDR Regulations mandate the disclosure of KPIs in the offer document by the issuer company under the heading ‘Basis for Issue Price’.
Requirements for Disclosing KPIs
The ICDR Regulations specify several conditions that must be met before KPIs can be disclosed in offer documents. These include:
i) Approval of the KPIs by the issuer company’s audit committee, and
ii) Certification of the KPIs by professionals such as statutory auditors, chartered accountants, or firms of chartered accountants or cost accountants.
Overview of the Technical Guide
The Technical Guide provides comprehensive guidance on various aspects of disclosing KPIs in offer documents, including:
i) KPIs that can be disclosed based on different industries;
ii) The roles and responsibilities of bankers, issuer companies, and practitioners; and
iii) Reporting requirements related to KPIs, including illustrative formats of KPI reports.
The Technical Guide is applicable to both practitioners and issuer companies for disclosing KPIs in offer documents as per the requirements of the ICDR Regulations.
Applicability of the Technical Guide
The Technical Guide is applicable only to initial public offerings (IPOs) as outlined in the ICDR Regulations and is developed considering the offer or sale of securities in India to prospective Indian investors only. It does not apply to offerings or sales of securities outside India.
Moreover, 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 engagement acceptance procedures, planning, materiality, and written representations.
Who are the Practitioners?
The term “practitioners” refers to statutory auditors, independent chartered accountants, or firms of independent chartered accountants that hold a valid peer review certificate issued by the Peer Review Board of the ICAI.
The ICAI’s Technical Guide on Disclosure and Reporting of KPIs in Offer Documents is an essential resource for practitioners and issuer companies looking to comply with the ICDR Regulations. By providing detailed guidance on various aspects of KPI disclosure and reporting, the guide ensures that KPIs are presented in a manner that is informative, easy to read, and search engine friendly.