ENTREVISTA DIRIGIDA A SOCIÓLOGOS

Q6.6.1 Can an accountant provide share valuations of shares in a family business?

YES. Such recommendations do not require an accountant to be licensed, provided the advice is given to a person who is an interested party in the family business and the advice is confined to advice on a decision about shares in the family business and does not, for instance, relate to other financial products that the business may acquire or dispose of.

Regulation 7.1.29(3)(c) permits ‘…advice on the…valuation ….of an incorporated or unincorporated entity’. The EM indicates that accountants can provide these services as they are concerned with the ‘administration and operation’ of the business.

Q6.6.2 Can an accountant provide a number of different valuations on, for example, the following bases: going concern, fire sale for equipment and stock?

YES. Such recommendations do not require an accountant to be licensed.

As detailed in Q6.6.1, Reg.7.1.29(3)(c) permits ‘…advice on the…valuation…of an incorporated or unincorporated entity’. Nothing in the regulation, or the EM, dictates how the valuation should be determined. It is, therefore, assumed an accountant is able to undertake a number of different valuations, depending on the needs of the client.

Q6.6.3 Can an accountant provide a comparison valuation based on publicly available information, between two listed companies that the client is

considering adding to an investment portfolio?

NO. This is not covered by Reg.7.1.29 as it is financial product advice, for which a licence is required.

Q6.6.4 Can an accountant sign an Investigating Accountant’s Report as a

Registered Company Auditor for a merger and acquisition or stock market float?

YES. Regulation 7.1.29(3)(a) allows for ‘the preparation or auditing of financial reports or audit reports’ and Reg.7.1.29(3)(c) allows for ‘conducting a due diligence

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on a business’ which in combination is what an Investigating Accountant’s Report is required for to satisfy the requirements of the Corporations Act.

The EM makes it clear that advice about a company’s financial statements such as Investigating Accountant’s Reports [can be] included in an exempt document (such as a PDS) without losing the benefit of the exemption.

Q6.6.5 Can an accountant following a client’s request, provide projected

financial statements for them (whether for internal budgeting or other purposes)?

YES. Regulation 7.1.29(3)(a) permits ‘the preparation or auditing of financial reports or audit reports’. Also, providing projected financial statements, by itself, is unlikely to be financial product advice.

The EM indicates that accountants can provide these services as they are concerned with the ‘administration and operation’ of the business. Therefore, an accountant can provide projected financial statements without being licensed, if the accounts are being prepared for internal purposes.

HOWEVER

Where the financial statements are prepared for the purposes of a merger,

acquisition or a stock market float, and are connected to the valuation of a financial product such as shares, licensing may be required (refer Q6.6.7).

Q6.6.6 Can an accountant, upon the request of the client, provide advice on the financial characteristics of two alternative businesses that the client is

intending to purchase?

YES. Provided the advice is purely factual information that the accountant is qualified to provide and is in the nature of due diligence (i.e. debt/equity, projected cash flow assumption and analysis, tax issues) then such advice does not require licensing as it is not providing a recommendation to buy or not buy one or other of the

businesses.

In such instances a suitable disclaimer should be attached to any such advice

making it clear that a recommendation on a financial product is not being made and it is up to the client to make an appropriate decision.

HOWEVER

Regulation 7.1.29(3)(c) which allows due diligence advice to be given, may not be used as a pretext for providing a financial product recommendation which is a decision for the client taking into account any financial product advice that the client may obtain from a licensed financial adviser.

Q6.6.7 Can an accountant provide a valuation of a business for sale without an AFSL?

YES. Reg 7.1.29(3)(c) provides an exemption for a valuation of an entity, whether incorporated or unincorporated, where that valuation is given to a person who is, or is likely to become, an interested party in the entity.

The advice must be limited to advice on a decision about the securities of the company or related company that carries on the business of the entity (or the interests in a trust where the trustee carries on the business of the entity in the capacity of trustee) and cannot relate to any other financial products that the entity may acquire or dispose of.

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The valuation also cannot be included in an exempt document or statement, such as a Product Disclosure Statement or Financial Services Guide.

HOWEVER

There may be professional indemnity insurance implications. Some insurers do not cover this type of work, so the accountant must ensure that their insurance is adequate before providing business valuation services.