It is becoming increasingly difficult to assess transactions and their reporting consequences.
The challenges
The accounting effects of transactions such as acquisitions, divestitures, formation of joint ventures and special purpose vehicles (for instance for leases or factoring) and other forms of collaboration (joint R&D) are challenging. These influence reporting, future results and have an effect on significant indices such as control quantities such as EBITDA, return on sales, or return on capital employed.
However, any assessment of upcoming issues needs to be carried out before the transaction, as these issues may have impact on the transaction as a whole. A transaction’s impact on accounting should be clear before contracts are signed.
PwC Romania's solution
Our Accounting Advisory team advises companies throughout the transaction process. We bring a unique blend of transaction and accounting expertise that helps clients manage the deals process smoothly, compliantly and within the timelines.
After the closing of a transaction to acquire a business, the acquirer faces several challenges related to the accounting for the acquisition and the integration of the new subsidiary.
The challenges
The business combination has to be accounted for at the acquisition date considering the results of the purchase price allocation as well as the gathering of data for the related disclosures. It might also be necessary to perform a GAAP conversion if the acquiree uses a different GAAP than the acquirer. Furthermore, the alignment of both the accounting policies and the chart of accounts (mapping) is required.
There are also several other “Day 2” issues that need to be taken care of, such as potential changes to the segment reporting and the impairment testing of goodwill.
PwC Romania's solution
Accounting Advisory's post-deal accounting service offering addresses all these issues. External support in navigating the complexities of the post-deal accounting issues and “Day 2” readiness will benefit clients in their daily operations. We bring a unique blend of transaction and accounting expertise that helps clients manage the post-deal process smoothly, compliantly and within the timeline.
Post Deal Integration Services
Post deal assistance
- Preparing a bridge analysis between actual accounting framework and group reporting framework;
- Alignment of accounting policies and accounting manual under the new requirements;
- Harmonization of the chart of accounts at group level;
- Assistance in developing internal financial reporting procedures;
- Agreed-Upon-Procedures on different matters.
Accounting assistance
- Analysing the new IFRS standard impact evaluation;
- Offering IFRS trainings;
- Accounting advice on complex matters - formal opinions on the appropriateness of the accounting treatment under different frameworks;
- Tools for an efficient IFRS implementation.
Reporting Assistance
- Assistance in Group reporting packages preparation (outsource/co-source the internal reporting function);
- Assistance in GAAP change;
- Financial statements preparation: consolidations, combinations on different accounting frameworks;
- Assistance in monthly closing activities.
Future of finance
- Reducing the reporting time;
- Minimising effort related to collection and processing of data through more extensive automation of transactions;
- More user friendly and relevant reports;
- Flexible and modern management reporting functions;
- Digitalization: dashboard analysis.
- Exit readiness
- Carve-out financial statements
- Accounting structuring
Exit readiness
Companies and their shareholders need to develop their exit strategy in good time, having considered various strategic alternatives against their corporate strategy and market positioning.
The challenges
They will then need to prepare rigorously for an exit to help maximise the value which can be obtained and to minimise the execution risks of completing the deal.
The approach to exit and advice that we give is tailored to the specific circumstances of each deal, taking into account the goals and objectives of different types of shareholders, e.g. Private owners, Private Equity houses, Sovereign Wealth Funds or Governments.
PwC Romania's solution
We can assess how prepared the company is for exit, whether this be an IPO, a trade sale or a secondary sale to another PE investor.
Working alongside the company and its shareholders we develop a set of recommendations for delivering a successful exit including:
- Gaining an understanding of the objectives and principal exit preparedness considerations;
- Developing the exit readiness agenda focused on minimising deal risk and maximising exit value;
- Designing a detailed roadmap and action plan, including timetable; and
- Prioritising actions and allocating responsibilities.
Carve-out financial statements
Spin-off transactions, as well as many M&A transactions, involve the divestiture of a subsidiary or business unit of a company rather than the whole company itself.
The challenges
A seller may need to prepare separate, stand-alone financial statements of the operations being spun-off or sold, commonly referred to as “carve-out financial statements”. But preparing carve-out financial statements for the first time can be a significant challenge, and there are many considerations a seller will need to bear in mind to meet buyer or investor expectations and to comply with M&A accounting standards.
Accounting standards are addressed individually for a particular transaction. Many local accounting standards set the regulatory environment explicitly for the preparation of carve-out statements. IFRS has no specific requirements, so locally accepted market standards and views have to be respected.
Why use specialists?
The preparation of carve-out financial statements is hardly a routine matter. Companies need to ensure that all the assets and liabilities of the separate business have been identified and that all relevant costs of doing business have been reflected in the carve-out financial statements.
What do we do?
We provide services for the preparation of a carve-out statement or for the assurance of this statement. In addition to preparing the financial statements, we provide the following services:
- Requirements analysis with respect to relevant capital markets and stakeholders;
- Determination of historical financial information required by regulation;
- Analysis of the complex history of the financial industry, especially the quality of existing financial information;
- Preparation of carve-out statements according to IFRS, US GAAP or other standards;
- Preparation of assured documentation regarding carve-out topics for the auditing process.
Why get PwC Romania involved?
Our specialists bring in 10+ years of experience in cross-border transactions. Our clients benefit from:
- Cost efficient approach;
- Definition of realistic goals and timelines;
- Enabling dual track strategies;
- Availability of experienced resources;
- Minimisation of transaction risks.
Accounting structuring
In many different types of transactions there is entity level complexity.
The challenges
This complexity is often new to clients and therefore in many instances the entity level analysis is not tackled or is not tackled early enough. Whether this is getting the right entity structure for a disposal, planning how cash will flow on a refinancing, selecting the appropriate listing entity or mapping out the detailed mechanics of a group reorganisation, other advisors often do not provide the support needed.
From an accounting perspective, organisations have different focuses which need to be thought through on a transaction. In many cases the entity level accounting implications need to be thought through early on to ensure the steps are implemented in a tax, accounting, regulatory and legally efficient manner.
Transactions can have unexpected impacts on group earnings and the consolidated balance sheet which may be a focus for listed or regulated clients. For private client’s entity level accounting is often crucial, particularly in its impact on future cash extraction (whether on distributable profits or recognition of capital) and in many jurisdictions, tax.
PwC Romania's solution
We are dedicated technical specialists with relationship skills, broad networks and extensive transaction experience.
We use our extensive experience to help clients navigate complexity.
We pull together the work of different advisors and provide options / solutions that incorporate the commercial, legal, tax, regulatory and accounting considerations needed for the deal and often fill the gap left by other advisors.
Our extensive experience in capital maintenance rules and accounting for transactions enables us to provide clarity on the accounting implications of a deal early on, allowing the optimal transaction structure –, both for the transaction and for ongoing purposes –, to be developed before it is too late to do so.
Providing the client with tools such as options papers, step plans and balance sheet modelling, we help them and their other advisors focus on the mechanics of actually implementing the transaction.
Contact us
Partner, Capital Markets and Accounting Advisory Services, Assurance, Romania
