Recognizing the need for reliable information in domestic and cross-border securities offerings and other fundraising activities, the International Auditing and Assurance Standards Board (IAASB) today released new International Standard on Assurance Engagements (ISAE) 3420, Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus.
Companies seeking to access capital markets commonly include pro forma financial information in their prospectuses as a key element to enable investors and others to better assess the investment opportunities presented. Pro forma financial information included in an issuer’s prospectus illustrates the impact of a proposed acquisition, equity or debt issuance, or other transactions on the issuer’s historical financial information as if such event or transaction had occurred at an earlier selected date.
“Pro forma financial information included in prospectuses plays an important role in informing the public’s investment decisions in today’s increasingly global capital markets. Enhancing public confidence in how such financial information has been produced is therefore especially important,” said Prof. Arnold Schilder, Chairman of the IAASB. “The IAASB is confident that this new standard will help meet the public interest need for harmonized practices internationally in this area,” Prof. Schilder added.
The new ISAE 3420 provides comprehensive guidance on the nature and extent of a practitioner’s work when engaged to report on the compilation of pro forma financial information. Among other matters, it establishes minimum benchmarks for suitable criteria for the compilation of such information. It also covers related engagement acceptance and reporting considerations. ISAE 3420 is effective for assurance reports dated on or after March 31, 2013.
About the IAASB
The IAASB develops auditing and assurance standards and guidance for use by all professional accountants under a shared standard-setting process involving the Public Interest Oversight Board, which oversees the activities of the IAASB, and the IAASB Consultative Advisory Group, which provides public interest input into the development of the standards and guidance. The structures and processes that support the operations of the IAASB are facilitated by IFAC.
IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of 167 members and associates in 127 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.
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