Transaction accounting - EY€¦ · Transaction accounting ... Corporate transactions are often ......
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Transaction accounting August 2016 Financial Accounting Advisory Services Contractual arrangements for acquisitions and the relevant international GAAP on business combinations and consolidations are becoming increasingly complex. Corporate transactions are often tightly scheduled and a single deal can raise many issues for a business, across a range of areas. Decisions made in the course of a transaction can have a significant impact on both the future tax and financial situation of your business. It’s important to keep track of the big picture, identify interdependencies between individual disciplines and constantly monitor the effects, objectives and risks of the transaction. In the aftermath of the financial crisis, information used for assessing the financial history and future of a company — in the context of a transaction — is subject to more scrutiny than ever before.
Transcript of Transaction accounting - EY€¦ · Transaction accounting ... Corporate transactions are often ......
Transaction accounting
August 2016
Financial Accounting Advisory Services
Contractual arrangements for acquisitions and the relevant international GAAP on business combinations and consolidations are becoming increasingly complex. Corporate transactions are often tightly scheduled and a single deal can raise many issues for a business, across a range of areas. Decisions made in the course of a transaction can have a significant impact on both the future tax and financial situation of your business. It’s important to keep track of the big picture, identify interdependencies between individual disciplines and constantly monitor the effects, objectives and risks of the transaction.
In the aftermath of the financial crisis, information used for assessing the financial history and future of a company — in the context of a transaction — is subject to more scrutiny than ever before.
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Working with you to develop the right transaction accounting option for your business
Helping you understand the impacts of your transaction
Time is a key factor in a transaction. Companies are under pressure to make a large number of decisions that can have far-reaching implications. It is important to monitor all potential effects of the transaction, as retrospective changes may be difficult.
EY’s transaction accounting advisory team focuses on the most effective way to present complex corporate transactions in your consolidated financial statements, while identifying the economic implications for your business. These transactions include acquisitions, sales of companies or individual operations (such as carve-outs), acquisition financing or refinancing, IPOs, the formation of joint ventures and group reorganizations.
We can help you to assess the opportunities, risks and consequences of your transaction at an early stage and show you the effect it will have on various aspects of your group, including your balance sheet, income statement and cash flow statement; existing loan agreements and those entered into for the purpose of the transaction; key performance indicators and balance sheet ratios, such as EBITDA, EBIT, ROI and EPS; and remuneration systems.
The transaction process — our services
Our services are structured around the four key phases of a typical transaction. They are designed to give you confidence that accounting and reporting requirements have been considered at each phase. We also assess risks to help you avoid delays reduce their impact.
Pre-deal phaseHow can we help?• Accounting due diligence for the target company• Presenting and assessing accounting, tax and legal alternatives for the transaction and the
related effects, opportunities and risks• Assessing alternative scenarios for the acquisition structure• Assessing the tax consequences of the transaction for your group
How do you benefit?• Detailed knowledge of accounting risks and support in managing them• Documentation of a transaction structure for tax and accounting purposes, supporting a
smooth financial integration with your group
Contracting phaseHow can we help?• Analyzing accounting options, such as:
• Using put or call options to acquire majority and minority interests• Share-based payment plans and the accounting effects of the contractual retention of key
employees• Contingent purchase-price payments and earn-out arrangements• Transfer of control• Restructuring measures
• Analyzing acquisition financing from an accounting and tax perspective, including:• Assessing equity versus debt financial instruments• Accounting for finance-related transaction costs• Assessing the accounting effects of embedded derivatives and fair value measurement• Hedging interest payments using interest and currency derivatives• Refinancing and replacing existing finance and derivatives• Tax deductibility of financing expenses, taking into account tax restrictions on the various
levels of the group structure and an analysis of the accounting consequences• Accounting treatment of shareholder and vendor loans
• Using the company’s business forecasts to understand how alternative contractual arrangements could affect its future financial statements and key performance indicators
How do you benefit?• Comprehensive analysis of the transaction’s future accounting impacts, in various scenarios• Contractual agreements designed for accounting purposes• Clear guidance for decision-makers
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A multidisciplinary team driving your success
Taking a holistic view of your transaction and its impact on your business, our multidisciplinary transaction accounting team works closely with our transaction and tax professionals to provide you with a single source of end-to-end support throughout the life cycle of your deal.
Looking across your deal to assess your individual requirements, we can help you develop a tailored support that anticipates all aspects of the transaction process and helps you to move efficiently through the transaction. We can support you to limit surprises and delays, and reduce time spent on post-transaction integration. Drawing on their extensive knowledge and deep cross-border experience and methodology, our teams respond quickly with tools and services that meet your requirements now, while assessing your future needs.
Implementing phaseHow can we help?• First-time consolidation or deconsolidation• Preparing and auditing the closing accounts• Determining and reviewing working capital adjustments• Purchase-price allocation• Advice on setting covenants for acquisition financing• Effect of accounting for employee stock-ownership plans on future earnings• Preparing and recording the fund flow• Preparing carve-out financial statements
How do you benefit?• Correct accounting in financial statements• Greater certainty when determining covenants• Better use of judgment in accounting
Post-deal phaseHow can we help?• GAAP conversion• Transaction-related accounting issues after the deal:
• Transactions with minority shareholders• Setting up and performing impairment tests• Hedge accounting of interest rate and currency risks arising from the financing• Subsequent measurement of acquisition financing• Determining and posting purchase price adjustments• Subsequent measurement of earn-out arrangements• Accounting for minority interests
• Harmonizing the acquiree’s financial reporting with your group’s accounting standards• Preparing an accounting policy manual and integrating it into your group’s reporting system• Support in interpreting loan agreements and preparing a compliance certificate• Preparing bank reporting• Analyzing the effects of refinancing• Debt push-down of acquisition financing, taking into account tax restrictions
How do you benefit?• Efficient integration of the acquiree in your accounting and reporting structures• Effective conversion of the acquiree’s accounting
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Contact:
Ralf Geisler Transaction [email protected]+49 6196 996 27304
EY | Assurance | Tax | Transactions | Advisory
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