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Article 3
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An expert engaged to issue an opinion shall be governed by these Guidelines. Issues not addressed by these Guidelines shall refer to the Regulations on Real Estate Appraisal, Statements on Standards for Valuation promulgated by the Accounting Research and Development Foundation (ARDF), or international convention. The operating procedures shall be assessed item by item for their completion, correctness, and reasonableness; facts represented in an opinion shall be true and correct and information used in the operating procedures shall be reasonable and proper to provide a reasonable basis for the expression of opinions on the object under review. Any legitimate reason for failing to comply with these Guidelines shall be elucidated in the opinion.
For the purposes of these Guidelines, correctness means appropriate and reasonable information used from the source of the information.
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Article 12
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To draw a conclusion of its opinion, an expert shall evaluate by the applicable circumstances whether each of the following complies with relevant regulations in order to examine the degree of consistency and reliability between the work executed and the opinion:
- whether the opinion fully reflects the scope of work which should be covered by the engagement.
- completion, correctness, and reasonableness of the operation procedures.
- adequacy and relevance of the information used and examinations, inquiries, calculations, or other necessary analyses conducted.
- relevance and reasonableness of material assumptions made.
- appropriateness and reasonableness of the method of appraisal or valuation employed and parameters used.
- pre-adjustment value and reasons, basis, relevance and appropriateness of any adjustment to a discount or premium.
- appropriateness and reasonableness of analysis, judgement, inference procedures, and conclusions conducted or reached, and whether they can be substantiated.
- reasonableness of a revision to a conclusion made upon an explanation with the principal or an approved related party prior to the issuance of an opinion.
- completeness of the contents of a working paper, the appropriateness and reasonableness of raw data used, and the degree to which the expert supports the opinion.
- whether any material subsequent events and their impact which exist after the record date of evaluation and before the issuance of the opinion have been appropriately addressed.
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Article 17
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An expert shall evaluate the level of future operating income and profitability of the object under review and take at least the following into account when adopting the income approach:
- future benefit flow
- obtaining historical financial information and making the necessary routine adjustments thereto.
- considering the industrial prosperity, market conditions, and the past operation or use conditions of the object under review.
- analyzing the reasonableness of assumptions made in the analysis of key factors concerning prospective financial information, comparing projected values and historical values of the material financial information items on which the prospective financial information is based, and analyzing the reasons for and reasonableness of material discrepancies (if any) between those values, with relevant supporting material obtained.
- increased capital expenditure and financial cost to accommodate future operational needs.
- determination and basis of the number of periods(forecast period and perpetual period) for estimating future income.
- determination of the future benefit flow and final value and basis and reasonableness of the relevant parameters (such as growth rate, tax rate, inflation rate), which should be compared with the corresponding information of market participants.
- consistency between the growth or decline of the future benefit flow and the analysis of economic and market conditions and management’s anticipation of the future performance of the object under review, etc.
- discount rate
- parameters and basis used for the choice of the discount rate, and reasons therefor.
- consistency between the discount rate and basis of extrapolation of the future cash flow.
- the discount rate of an intangible asset is normally higher than the overall discount rate of the enterprise using said asset.
- provide data in support of a premium or discount, for example, obtain information of a professional database or professional study report or consult other experts, and, if a similar transaction is drawn on, evaluate the appropriateness and reasonableness of the information on the transaction used.
- conduct a sensitivity analysis of any change to an assumption of a key input value where necessary.
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Article 19
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An expert basing its opinion on other expert reports (such as real estate appraisal reports or valuation reports) or a self-valuation report of the principal shall at least implement the following procedures:
- consider the requirements governing use of information generated by management’s experts as set forth in ARDF Auditing Standards nos. 620, “Using the Work of an Auditor's Expert,” and 500, “Audit Evidence,” when evaluating the professional capability, competence, and objectivity of other experts or the personnel of the principal conducting the valuation.
- evaluate, in light of each of the following with regard to the object under review, whether the procedures by which the opinions and conclusions in other expert reports or a self-valuation report of the principal are developed are comprehensive, correct, and reasonable, and confirm said procedures are legally compliant and consistent with the Regulations on Real Estate Appraisal, relevant Statement on Standards for Valuation, or international convention being drawn on or applied: relevant information, scope of the appraisal or valuation report, appraisal or valuation method employed, major assumptions, parameters, adjustment and inference procedures, opinions and conclusions, sources of data used, examinations, inquiries, calculations, or necessary analyses conducted. The expert shall, where necessary, request the principal to obtain the working papers from other experts.
- analyze the reasons for and reasonableness of any discrepancy in the opinions and conclusions of the reports if two or more reports are relied on.
- evaluate whether such other expert reports or the principal’s self-valuation report make sufficient basis for the expert to form an opinion, and, where necessary, collect other related data and implement other procedures, and, upon obtaining sufficient and proper information, analyze whether the difference between the results of evaluation and contents of engagement (such as the estimated transaction price or share exchange ratio, acquisition price etc. of the object under review) substantiates a reasonable conclusion sufficiently.
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Article 20
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An expert validating the principal’s evaluation results in accordance with Article 16 or 17 of the Acquisition and Disposal Regulations shall at least implement the following procedures:
- whether the evaluation method employed for validation is legally compliant;
- obtain raw data or collect data by itself to confirm the appropriateness and reasonableness of data used by the principal;
- verify the similarity between the object under review and like cases introduced by the principal and confirm neither party to the transaction is an interested party of the company;
- recalculate the evaluation results to verify their correctness;
- examine the difference between the evaluation results and estimated transaction price and evaluate whether such difference substantiates a conclusion that the latter is reasonable.
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Article 24
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Representations shall include representations that the expert is both professional and independent, that it has evaluated the major basis on which its opinions are developed, that it has evaluated [and confirms] the appropriateness and reasonableness of information used, that it complies with these Guidelines and relevant laws and regulations, that there is no contingent compensation, and that no presumption is made of the conclusions of the opinions etc.
An expert is responsible for the opinions it expresses. No representation as made above may be a representation that the liability of the expert is reduced by the use of other expert reports or information provided by the principal.
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Article 26
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The text of an opinion which an expert issues based on the value of its own estimation of the object under review shall specify, as a minimum:
- value criterion and value premise;
- record date of evaluation;
- material assumptions and restrictions applied;
- reasons for employing the appraisal or valuation method and related parameters employed, and process of calculation;
- adjustments, analyses, and determinations made;
- information used and its sources, for example CPA-audited financial statements, Market Observation Post System, databases etc. Whether the evaluation procedure and information are appropriate and reasonable shall be indicated if information is sourced from the internal information of the principal or object under review which has not been verified by an impartial third party, for example the expert’s own unaudited figures and prospective financial information etc. ;
- final value or value interval;
- conclusions of opinions: comparison between the contents of engagement, for example the estimated transaction price or share exchange ratio, acquisition price etc. of the object under review, and the final value or value interval, and express opinion on the relevant reasonableness.
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