The Bangladesh Securities and Exchange Commission has framed a guideline for asset revaluation of listed companies, aimed at preventing “inflated” disclosures.
This is to restrict upward revaluation of lands, buildings and intangible assets.
The guideline emerged amid allegations of over-valuation of assets by a section of companies which inflated offer value in the process of using book building method of primary offer.
In absence of a specific guideline so far, some companies prior to submission of their IPO proposals revalued their respective assets thrice in two years on excuse that the prices of their assets have increased commensurate with rising market prices.
Framing asset revaluation guideline was one of the recommendations of the probe committee on stock market debacle in December, 2010. After receiving instruction from the finance ministry, the regulator in November last year formed of a two-member panel to prepare a guideline on asset revaluation of the listed companies.
The BSEC in a notification issued on Monday said the guideline for revaluation of assets imposed with immediate effect.
To revaluate assets, a company needs some general and disclosure requirements and the valuer should have some ethical principles, according to the notification.
Under the guideline, upward revaluation of leasehold lands and buildings having no transferring rights, plants and machineries having end economic life of less than 50% of its total useful life as estimated at acquisition, vehicles and furniture and so on are not allowed.
No dividend must be issued out of any revaluation surplus. The decision of valuation and appointment of the valuer must be taken by the board of directors of the companies concerned.
The valuer needs to submit the valuation report to the board along with all workings and documents, and the board will decide next course of action.
The valuer will provide a report and fairness opinion duly signed by its chief executive which will form integral part of the valuation report.
In their report, the valuer must confirm that the valuation has been undertaken in accordance with the International Valuations Standards and that they have maintained the fundamental principles of ethical conduct namely integrity, objectivity, competence, confidentiality and professional behavior regarding the valuation.
The revalued amounts of assets and liabilities must be included in the financial statements in accordance with the applicable provisions of Bangladesh Accounting Standards (BAS) and Bangladesh Financial Reporting Standards (BFRS).
After preparation of the financial statements, the management will hand over the same to the auditors along with all workings and documents provided by the valuer.
The auditor will examine all relevant documents and furnish their opinion in the auditors’ report regarding whether the valuation report has been prepared and treated in accordance with BAS and BFRS and other applicable laws, rules, regulations and guidelines or not.