Economic and financial uncertainties due to the pandemic present numerous challenges for responsible entities (REs), including in regards to the valuation of scheme assets. Yesterday, ASIC published an article acknowledging this, noting a lack of comparable transactional data, uncertainties around cash flow forecasts, and the shape and timing of any economic rebound, as some of the issues faced by REs. Despite these issues, ASIC is reminding REs of their statutory duties and the importance in the current environment of ensuring valuations of scheme assets are regular, robust and reasonable.

ASIC is encouraging REs to ensure—

• valuations are reasonably current and regular
• valuations are performed using appropriate methods and assumptions for that asset class
• assets are promptly written down should the cash flows of an asset be negatively impacted directly or indirectly by COVID-19 restrictions
• estimates are developed on a sound and reasonable basis, and they consider whether past performance and historical inputs are still reflective of future outcomes
• valuation polices are regularly reviewed by the RE's management and board, and
• valuations are carried out by unbiased valuers and valuers are periodically rotated by the RE.

ASIC reminds REs they should provide members with timely, full and fair disclosure of asset values as part of the fair and efficient operation of schemes, and should inform members of the processes they are implementing to support the valuations.

ASIC monitoring responsible entities

ASIC states it is actively monitoring the valuation practices of REs during this period of market disruption and may take regulatory action against REs that do not comply with their obligations to provide fair and reasonable valuations of fund assets.

Other resources

Valuations are an area every fund manager should draw their attention to and you can read more about this in our publication Questions every fund manager must ask in the face of the COVID-19 crisis. Also, ASIC has previously written to REs, noting its expectation that REs are monitoring valuations and their flow through to unit prices. For more information about COVID-19 related commercial and legal challenges please visit our COVID-19 Hub.

If you need help with understanding your obligations and the issues around the valuation of scheme assets, our Funds Management team can help.