The Finnish Securities Markets Act and the rules of the Helsinki Stock Exchange do not specifically regulate the disclosure of financial information in pro forma (a standard financial statement showing potential expected income, costs, assets or liabilities) form. However, the Decree on Listing Particulars 197 issued on March 19 1998 by the Ministry of Finance stipulates that if the annual accounts or consolidated annual accounts of a company are not accurate and sufficient with respect to the financial position of the company, the prospectus must contain more detailed additional information. Issuers usually fulfil this requirement by disclosing pro forma statements in prospectuses. According to the decree pro forma accounts and quarterly reports may be included in the prospectus only with the consent of the Financial Supervision Authority (FSA). The FSA has issued a brief statement (K/21/99/PMO) regarding the grounds on which consent may be granted. In accordance with this statement, the auditor of the company must issue a covering letter discussing whether the pro forma information gives an accurate and sufficient impression of the company's financial status.

In June 2001 the Finnish Institute of Authorized Public Accounts issued a guideline on using pro forma financial information in prospectuses published in accordance with the Securities Market Act. The guideline has been drafted in cooperation with the Helsinki Stock Exchange and the FSA. The purpose of the guideline is to assist a company's management in drafting pro forma financial statements for prospectuses. The guideline contains principles on drafting pro forma statements and some examples on how these principles should be applied.

The guideline states that if the issuer has gone through or is about to go through essential changes to its business, and the latest audited annual accounts or the latest quarterly report do not reflect the current status as a result of this, adjusted pro forma information must be published in order to make the figures comparable. When considering whether pro forma information is necessary the issuer should take into account the line of business and the market areas of the company, turnover and the balance sheet structure, as well as the share capital and the ownership structure of the company. In general, pro forma information should be published only in relation to the latest full accounting period and/or the latest quarterly period. Pro forma adjustments should be tied to defined business activities and they should be divided into and presented separately as one-time adjustments and adjustments that will have a long-lasting effect.

The guideline states that the prospectus shall clearly state what information is pro forma and the purpose of presenting pro forma information. The prospectus must also make it clear that the pro forma information by itself does not give an accurate view of the financial status of the company. However, the pro forma information must be based on the audited annual accounts and/or a published quarterly report. Any pro forma information must be presented in tables. Further, the prospectus must disclose any assumptions and source material used in drafting the pro forma information.

In addition, the Institute of Authorized Public Accounts has published a separate guideline on how the auditors should review the pro forma financial information to be included in a prospectus. The statement from the auditor should take a stand on whether the pro forma information has been presented in accordance with the principles set out in the prospectus, whether these principles comply with the accounting principles of the issuer and whether the pro forma adjustments comply with the principles set forth by the FSA.

For further information on this topic please contact Ari-Pekka Saanio at Borenius & Kemppinen by telephone (+358 9 615 333) or by fax (+358 9 61 53 34 99) or by e-mail ([email protected]).

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