Reporting accountant services

Where existing financial statements don’t meet the regulatory requirements, you need to prepare and include special purpose financial statements or historical financial information for inclusion in the investment circular. 

Typically, historical financial information is required to cover the last three years and is prepared under UK-adopted international accounting standards.

An accountant’s report accompanies this and acts a special purpose 'true and fair' audit opinion on the historical financial information.

Pro forma financial information shows the hypothetical effect of the transaction on the company's most recent balance sheet and income statement, as if the transaction had occurred at the start of the period being reported on or the balance sheet date reported. It is either required or voluntarily included in the investment circular.

We provide the required limited assurance report on the proper compilation of this financial information and whether the basis of preparation is consistent with the company’s accounting policies. Depending on the capital market, this may be either a private report or a public report published alongside the pro forma financial information in the investment circular.

A profit forecast gives a maximum or minimum level of results for a period following the audited financial statements. It may be stated in words or figures, either in express terms or implied.

For a transaction subject to the Takeover Code, any new or existing ‘live’ profit forecast needs to be included in the offer document or offeree board circular (as appropriate), together with an accountant’s report.

We provide the required limited assurance report on the proper compilation of the profit forecast on the basis stated and that the basis of preparation is consistent with the company’s accounting policies.

A quantified financial benefits statement contains expected synergies or stand-alone cost savings made in relation to the proposed transaction.

For a transaction subject to the Takeover Code, if the offeree or offeror publishes this information during an offer period, it must be accompanied by an accountant’s report.

We provide the required limited assurance report on the proper compilation of the quantified financial benefits statement on the basis stated.

Most UK capital markets require applicants to have established procedures that provide a reasonable basis for the directors to make proper judgements as to the financial position and prospects (FPP) of the company and its group.

To demonstrate this, the company must prepare a detailed board memorandum that documents group FPP procedures and any changes due to take place from the point of admission to the capital market.

We can provide one or both of the following.

Due diligence report: descriptions of the procedures that the applicant considers necessary in meeting its FPP procedures obligations; findings from our enquiries made of the directors and management; a factual commentary on strengths and weaknesses and other matters to assist the directors and the sponsor/nomad to assess the procedures described, together with our recommendations.

Limited assurance report: our opinion on whether FPP procedures have been established.

In the context of a Class 1 acquisition or disposal by a company with an existing premium segment listing, we can also provide an FPP procedures limited scope due diligence report. This focuses on the incremental effects of the acquisition/disposal on the group’s existing FPP procedures.

A long form report is a private due diligence report that the reporting accountant prepares for the directors of the company and the sponsor/nomad. It forms part of their due diligence in relation to the company’s proposed admission to a UK capital market and typically covers:

• business history and structure
• business activities and operations
• management and staffing structure
• taxation compliance
• historical trading results, cash flows and balance sheets

The historical review period usually mirrors the track record period of the historical financial information, and any interim financial information, published in the investment circular.

A long form report tends to be more comprehensive in scope than for a private financial due diligence report. This is because the sponsor/nomad is acting out of an abundance of caution and keen to show they’ve met their regulatory due diligence obligation.

Using our reporting accountant experience and sector expertise, we work with you and your sponsor/nomad to refine the scope of the long form report. We ensure that it focuses on the key drivers and risk areas for your business while also still meeting their needs.

The investment circular includes a public statement confirming that working capital (ie, liquidity) is sufficient for at least the next 12 months. Private or internal financial forecasts will also need to support this.

We prepare a due diligence report on the company’s supporting financial forecasts (a working capital report). We comment on the financial forecasts and whether or not the working capital statement has been made after due and careful enquiry. The scope typically covers:

• review of the forecast model covering at least 18 months post investment circular
• assess the key forecast assumptions and basis of preparation
• check the method of compilation including deal structure
• sensitivity analysis to test the robustness of the directors' statement under a reasonable worst-case scenario
• comment on adequacy of headroom under base case and reasonable worst case, including compliance with any financial covenants

Capitalisation and indebtedness comfort letter: agreed upon procedures covering the figures in any capitalisation and indebtedness statement in a prospectus.