If you’re planning to undertake a capital markets transaction or an Initial Public Offering (IPO) you’re going to require an independent and impartial assessment from a reporting accountant.
What is a reporting accountant?
Most equity capital markets transactions in the UK require the appointment of a Reporting Accountant who will provide various assurance reports and letters addressed to the company and financial advisor to ensure compliance with the rules and regulations.
Principal workstreams of the accounting reports typically include historical financial information (HFI), long form due diligence, financial position & prospects procedures (FPPP), and working capital reporting.
The reporting accountant responsibilities and deliverables
The exact scope and detail of the accounting reports will be transaction specific, but the key deliverables are well defined and understood through market practice.
Accounting reports on Historical Financial Information (HFI)
Preparing International Financial Reporting Standards (IFRS) HFI can be a complicated and time-consuming process. Our reporting accountants take the stress away from this, leveraging their significant experience and technical accounting knowledge to provide:
- An opinion on the company’s IFRS three-year HFI, similar to an audit opinion.
- Review or audit of interim financial information, depending on the market chosen.
- Consideration of the impact of key accounting policies and judgements and any significant acquisitions in the track record period.
Long form report
The scope of the Long Form due diligence report is mutually agreed between the company and the financial advisor and typically covers:
- History of the business
- Commercial activities of the business
- Organisation structure and employees
- Trading results
- Assets and liabilities
- Cash flows
Working capital - report
Under the Listing and AIM Rules, a company is required to maintain sufficient working capital of at least 12 months from the date of the investment circular.
The private report supports the working capital statement that the directors need to make in the investment circular. This involves reviewing the company’s projections for a post-transaction period of typically more than 18 months.
Typical contents include:
- Basis of preparation of the projections
- Historical budgeting accuracy
- Profit and loss projections
- Cash flow projections
- Balance sheet projections
- Bank facilities and covenant headroom
- Sensitivity analysis
Financial Position and Prospect Procedures
To execute an IPO process, procedures need to be established which provide a reasonable basis for the directors to make proper judgements as to the financial position and prospects of the company.
We assist directors with the preparation of a detailed board report, documenting the procedures in place, but we also may prepare a detailed report addressed to the company and financial advisor.
Typical areas covered include:
- High level reporting environment
- Budgeting and forecasting
- Management reporting
- Significant transactions
- Strategic projects and initiatives
- Financial accounting and reporting
- IT environment
Pro forma financial information opinion
A pro forma income statement or net assets statement may be required for inclusion in the investment circular. The reporting accountant will provide an opinion on whether the pro forma information has been properly compiled on the basis stated and is consistent with the company’s accounting policies.
Depending on the choice of market, the opinion will be either a private report addressed to the company and its financial advisor or included in the investment circular.
Several other comfort letters may be requested, covering matters such as:
- Work in connection with the director’s statement in the investment circular that there has been no significant change in the company’s financial position between the date of the most recent audited financial information and the date of admission.
- Confirmation as to the proper extraction of financial information in the investment circular.
- Confirmation as to whether tax disclosures in the investment circular comply with our understanding of current tax legislation.
Our experience and approach
Evelyn Partners' ECM team has extensive experience of acting as Reporting Accountant on transactions on the London Stock Exchange. Our experienced team has executed over 50 equity capital market transactions, with a market capitalisation in excess of £50bn.
Our specialists and experts will give you practical advice throughout the process, covering all aspects of the IPO process or capital market transaction. In addition, we can be your sounding board for any recommendations you receive from your other advisors.
We are passionate about providing excellent service and the lead partner will be very visible on a day-to-day basis, with the aim of running an efficient process and leveraging prior experiences to add value and provide timely and relevant insights throughout.