Sebi's whole-time member Ananth Narayan on Friday raised concerns over certain asset valuation practices, and proposed that valuers should disclose key assumptions, sensitivity ranges, and track records of firms they are assessing just like credit ratings agencies.
"Just as credit rating agencies now disclose rating histories and are held to standards, it may be time for valuers to disclose assumptions, sensitivity ranges, and track records, and be held accountable for egregious deviations," said Narayan.
Speaking at the ETCFO NextGen Summit in Mumbai, Narayan highlighted issues such as "valuation shopping", conflicts of interest, and sharp accounting practices that could mislead investors.
He also pointed to potential conflicts of interest, as valuers are often hired and paid by the entities they assess, which could lead to biased valuations.
Additionally, differing assumptions among valuers have resulted in wide divergences in asset valuations, with little accountability when valuations shift dramatically over time.
Narayan also emphasised the need for closer collaboration with audit committees and auditors to strengthen trust in financial reporting. He suggested reducing the current 70 to 140 day gap between financial results and annual reports to enhance transparency.
"Trust is the foundation, capital formation is the engine, and regulation is the guardrail. CFOs are at the wheel," Narayan said, urging them to move beyond compliance and embrace the spirit of accounting standards.
He cautioned against practices like insider trading and fund siphoning, stressing that financial statements are not mere formalities but a "solemn promise" of a company's financial health.
"If that trust is broken, the damage to capital markets can be immense," he warned.
-- Khushboo Tiwari, Business Standard
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