Financial Accounting Advisory Services

Transcription

1 Financial Accounting Advisory Services Bringing clarity to the accounting for restructuring activities October 2014

2 Agenda 3 About EY 13 Contacts 15 Page 2

3 Accounting for restructuring Page 3

4 Why do companies reorganize? Group simplification and optimization Drive down costs Reduce risks Tax efficiency Acquisition or disposals Clean up group structure prior to a disposal or after an acquisition Carve out IPO Potential need to restructure Distributable reserves Alleviate dividend blocks Planning and management of distributable reserves Page 4

5 Key questions If any of the following questions are on your business agenda, EY can help. Are you considering a group reorganization? Perhaps for commercial, tax or regulatory reasons? Do you have to pay (or at some point intend to pay) sizeable dividends to shareholders? Restructuring solutions Have you previously experienced distributable reserve issues or dividend blocks? Do you have numerous legal entities or complex corporate structures? With increasing regulation, globalization and transactions becoming more complicated (such as JVs and refinancing deals), it can be hard to navigate through the complexity of how the organization structure needs to adapt to best achieve business targets. Are you contemplating an IPO or disposal? Page 5

6 How EY can help If you are considering or are in the process of planning a reorganization, EY can help. Group simplification and optimization: Optimize the group structure to reduce costs, including administrative costs to prepare, audit and file the financial statements of the group companies Minimize risk through designing and validating a structuring step plan Ensure that the technical accounting challenges that relate to any step plan are considered and understood Acquisition or disposal transactions: Review and assess the accounting impact on either the sell-side or buy-side in respect of restructuring transactions (this includes transferring businesses and cleaning up entities before or after the transaction) Distributable reserves: Use the EY Distributable Reserves Model to identify existing distributable reserve constraints and those that may arise in the future Propose structural solutions to resolve dividend blocks and create distributable reserves Undertake analysis of reserves to identify what is distributable and what is not Page 6

7 How we work A case study Background A major US corporation wants to exit a particular operation in 20 European jurisdictions. Disposal entities do not form a subgroup and contain assets or liabilities to be retained plus extensive intercompany funding arrangements. Objective The client needs to create the appropriate disposal group structure and place each entity onto a debt-free or cash-free basis in compliance with local legal and accounting requirements. Challenges There is a need to assess implication at the level of each jurisdiction for: Local GAAP Distribution rules Debt waiver accounting Tax planning requirements Engagement EY to provide detailed analysis of reorganization accounting and distribution rules across all 20 jurisdictions, understand complexities and identify solutions that would maximize value from the client s proposed divestment and support the client s tax and treasury strategies. Page 7

8 How we deliver Case study FAAS input Key steps: Initial modeling of the transaction steps on an entity-by-entity basis to establish likely issues, key transaction flows and estimated magnitude of intercompany payables and receivables and other balances that would need to be cleared Detailed accounting, distributions and group reorganization input for each of the 20 jurisdictions including Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Ireland, Italy, Netherlands, Poland, Norway, Romania, Spain, Sweden and UK Working alongside client finance, tax and treasury, plus external lawyers and tax advisors, determining solutions to mitigate potentially adverse accounting or tax consequences, including facilitation of all-party workshops Ongoing modeling of the accounting steps plus updates for tax planning and changes in intercompany and cash balances based on latest trading Preparation of detailed step plans plus assessment of the accounting disclosures to be made in the local statutory accounts of each of the entities within the disposal group Presentation of findings to key client personnel and steering committee for the transaction FAAS output Key steps: Detailed accounting step plan setting out reorganization analysis and approach on a country-by-country basis Modeling of financials through to anticipated completion date for each jurisdiction incorporating trading assumptions and step plan entries Full analysis of local GAAP accounting entries plus the accounting disclosures for each set of local GAAP accounts Clarity and confidence in the planned reorganization steps across client finance, tax, treasury, legal and corporate development personnel Page 8

9 What benefits can you expect from our structuring services? Enhancing transaction outcomes Maximize value for the transaction by: Providing visibility over future financials Optimizing the accounting and tax outcomes Maximizing distributable reserves Working with our advisory teams Reduce risk of transaction failure through careful design and validation of step plan Help in understanding the accounting implications of proposed structure transaction Advise on the most optimal structure and how to achieve this Working with finance function Provide assistance in implementing the necessary restructure Reduce risk of accounting error Ensure appropriate accounting and disclosure within financial reports Assist with audit readiness Assist in assessing accounting treatment to support discussions with auditors for non-audit clients Provide guidance for maintaining and tracking supporting documentation to assist in effective and efficient audit process Overall Access to cross-border multidisciplinary teams (encompassing accounting, tax and legal) with experience of structuring issues and related accounting Maximize transaction value and reduce risk Optimize tax and distributable reserves position Page 9

10 EY Distributable Reserves Model A unique EY tool The EY Distributable Reserves Model helps organizations identify distributable reserve constraints that may currently exist or arise in the future. This allows them to avoid surprises and removes the need to fire fight these problems as they arise. The distributable reserves position of each entity is shown in easy-to-see color formatting (bright green signifying large reserves, bright red significant deficits) Page 10

11 EY Distributable Reserves Model What benefits can you expect? Increases visibility and confidence over ability to pay dividends The model creates the group structure clearly showing distributable reserves and deficits. Separate charts for current state, future state and dividend blocks are automatically generated. This provides visibility of distributable reserves position throughout group both currently and in the future. Reduces risk of unexpected dividend blocks or unlawful dividends This assists the group in efficiently maximizing potential payouts to shareholders. By identifying potential current and future distributable reserve blocks, this should allow clients to resolve issues before they become a problem (via restructuring, capital reductions, etc.). Enables sensitivity analysis The model can also be used to conduct sensitivity analysis. For example, if profit forecasts are split between entities, what impact will this have on the future ability to pay dividends? Withholding tax or distribution policy assumptions can be varied. Automatically creates group structure The tool allows us to easily create and amend corporate structure charts all at the click of a button. Provides easy access to relevant information The model can also act as a database management tool, allowing all relevant distributable reserves data to be stored in one place. Page 11

12 Our credentials Advised on the accounting for large successful IPOs, including assessing the desirable listing structure and identifying, and advising on maximizing distributable reserves Provided advice to large corporate groups, private equity investors and investment banks on the accounting for complex structuring transactions Undertaken extensive work on developing accounting options and proposed structures for group reorganizations, with a view to ensuring that distribution targets can be met after the transaction has completed Coordinated restructuring advice involving multiple jurisdictions, ensuring that the impact on all group entities is appropriately considered Page 12

13 About EY Page 13

14 Your regional EY network Africa Angola, Botswana, Cameroon, Chad, Congo, Democratic Republic of Congo, Equatorial Guinea, Ethiopia, Gabon, Ghana, Guinea, Ivory Coast, Kenya, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Nigeria, Rwanda, Senegal, Seychelles, South Africa, South Sudan, Tanzania, Uganda, Zambia, Zimbabwe Belgium and Netherlands Germany, Switzerland and Austria Commonwealth of Independent States Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Russia, Ukraine, Uzbekistan Central and Southeast Europe Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Cyprus, Czech Republic, Estonia, Greece, Hungary, Kosovo, Latvia, Lithuania, FYR of Macedonia, Malta, Moldova, Montenegro, Poland, Romania, Serbia, Slovakia, Slovenia, Turkey France, Maghreb and Luxembourg Algeria, France, Luxembourg, Monaco, Morocco, Tunisia Financial Services Organizations Belgium, Channel Islands, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Switzerland, the UK India Bangladesh, India Mediterranean Italy, Portugal, Spain Middle East and North Africa Afghanistan, Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Oman, Pakistan, Palestinian Authority, Qatar, Saudi Arabia, Syria, Tunisia, United Arab Emirates Nordics Denmark, Finland, Norway, Iceland, Sweden United Kingdom and Ireland The UK, the Isle of Man, the Republic of Ireland EY Global Countries worldwide 150 Employees worldwide 175,000 US$ revenue ( ) 25.8b Page 14

15 Financial Accounting Advisory Services contacts Richard Crisp Graham Roberts Page 15

16 EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com EYGM Limited. All Rights Reserved. EYG no. AU2672 EMEIA Marketing Agency ED None In line with EY s commitment to minimize its impact on the environment, this document has been printed on paper with a high recycled content. This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice. ey.com