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Wednesday 30 March 2011

11-66MR New guidance aimed at enhancing the reliability and quality of expert reports

ASIC has released today updated guidance that is aimed at enhancing the reliability and quality of expert reports that are commissioned to assist security holders and others to make major decisions, including on takeover bids, schemes of arrangement and related party transactions.

The guidance is contained in Regulatory Guide 111 Content of expert reports (RG 111) and Regulatory Guide 112 Independence of experts (RG 112).

These two RGs are being released in conjunction with further new guidance from ASIC – Regulatory Guide 76 Related party transactions (RG 76) – which is aimed at bringing a substantial improvement in disclosure and decision making in public companies and managed investment schemes (MISs) that propose or enter into related party transactions. Related party transactions often involve expert reports.

All the guidance released today – RG 111, RG 112, and RG 76 – has been the subject of extensive public consultation by ASIC. This consultation followed reviews by ASIC of the independent expert sector and related party transactions that identified various compliance concerns.

ASIC Deputy Chairman Belinda Gibson said ASIC's decision to provide the new guidance reflected the importance to investors of quality expert assistance when assessing significant corporate transactions, such as takeover bids and schemes of arrangement.

'Investors are entitled to expect that an expert is independent, that the expert’s conclusions have a reasonable basis and that any assumptions in the report are spelled out fully', Belinda Gibson said.

'The guidance provided today is aimed at improving the quality of expert reports, and providing companies and other entities with guidance on ensuring that experts who provide reports are independent.'

'Overall, the aim is to raise investors' confidence in these reports.'

Additional guidance is provided on how experts should assess whether a proposal is fair and reasonable. It requires experts to explain any material difference between their assessed value of a security and the recent market price of the security.

ASIC requires that experts have a reasonable basis for forward-looking statements. There is clarification about the use of the discounted cash flow methodology, particularly when valuing a start up project where there is a long lead time until cash is generated. The expert must have a reasonable basis for the forward looking information and be explicit in disclosing the extent and nature of the adjustments made to allow for development stage risks.

Copies of the regulatory guides and reports can be found on the ASIC website at

For further information:

ASIC Media Unit

Telephone: 1300 208 215



Last updated: 30/03/2011 12:00