Accounting Advisory

Capital markets advisory

Bringing the global resources of PwC to provide joined-up solutions

Ensuring best outcome

• Objective assessment of investor targeting
• Independent view on investor feedback
• Checks and balances on advice from banks
• Reviewing optimal offer structure
• Running more than one option in parallel, if applicable

Project management

• Managing the transaction, including timetable and deadlines
• Assistance with documentation and presentations
• Ensuring various parties work effectively and stay focused on your needs
• Helping you manage multiple information requests

Sector expertise

• Strategic and practical analysis, testing and preparation of business plan and equity story

Deal preparation

• Working with you at an early stage to build a roadmap for a transaction and identify and resolve key issues
• Tailoring the equity story for a new and larger audience
• Coordination of a range of PwC experts to manage potential issues at an early stage

Objective analysis

• Advice on strategic options, including IPO vs trade sale
• Unbiased view on valuation, market trends and sentiment
• Advice on timing
• Advice on market positioning
• Objective review of governance

Adviser selection

• Thorough, accountable process to appoint banks and other advisors and obtain best value
• Assisting in transaction and syndicate structuring
• Optimising investor coverage, research provision and placing power

Publications

• Considering an IPO to fuel your company’s future?
• Roadmap for an IPO

IPO readiness

Our approach identifies key issues and risks early in the process, providing timely guidance to implement necessary plans to remediation

Assess - Identify key issues and gaps

• Assess compliance with best practice and/or the requirements of the chosen market
• Identify deal breakers
• Identify any deficiencies

Remediate - Execute the plan

• Reporting progress to the board
• Ongoing monitoring/Deficiencies filled
• Third party support
• Necessary systems and processes in place

Plan - Develop a road map

• Plan the remediation
• Assign responsibility
• Prioritise work streams
• Timetable the remediation

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'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 involved?

Our specialists bring in 10+ years of experience in cross-border transactions. Our clients are 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 clients 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'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 deep specialism 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.

Restructuring

As a company faces challenges from macro and/or micro economic issues, they face a host of issues that – if not met with urgency and diligence –, may lead to its demise.

The challenges

A number of tools may be used by management to affect a turn around plan. To the uninitiated, picking the right tool may be daunting. At certain times a simple turn around may be required, at other times a well-scripted bankruptcy that filing consider all aspects of the enterprise, including financial, tax, operational and overall focus.

Depending on the tool selected, it may be a difficult, time intensive commitment for all parties. Complex filing requirements as well as potentially a new basis of accounting will require significant management time and attention.

PwC's solution

Accounting advisory advises through the entire Distressed continuum and can support our Clients in the accounting treatment of a restructuring.

Complex projects advisory

Power stations, airports, highways, or a new plant: a successful handling of capital projects is complex and challenging for both suppliers and customers in many ways.

The challenges

Changes in requirements, influences, or priorities are the reasons for unexpected results in each project phase. Prerequisite for successful projects is an organization that leads to effective project handling, not only at the process and system level but also in the employee’s skills.

Professional project management of all organisational structures is crucial for the success of the project as a whole.

To manage and lead the projects in a successful manner, transparency – from a commercial perspective – is essential. Many of our clients struggle with implementing a meaningful controlling system that operates on the same level as the technical project functions. The projects are solely driven by the technical requirements, lacking any commercial guidance. Cost to complete and, consequently, the profit or loss of a project are not reliably predictable. Also, the transparency to challenge technical countermeasures and to mitigate project risks is not readily available and lead to avoidable losses in the projects.

These complex issues also need to be reflected in the financial statements and in the communication to management and supervisory boards. Both accounting and communication are sensitive factors as the impact of complex projects is significant to the reporting entity.

PwC's solution

Accounting Advisory's Complex Projects Team supports clients in a variety of challenges and helps to remediate projects in trouble, to raise commercial project organization to good business practise and to implement early warning mechanism.

GAAP conversions

A GAAP conversion will pose a significant challenge to most companies‘ infrastructure.

The challenges

• It will not only impact the top company’s accounting, but also the reporting of subsidiaries, joint arrangements and associated companies.
• A GAAP conversion can be considered a complex project that needs full attention next to the ongoing daily business.
• Naturally most companies‘ accounting, controlling and tax resources are limited.
• Along the conversion guidelines, processes and the IT environment need to be adjusted and staff needs to be trained up.

Client Benefits

• Early assessment of complexity and costs
• Efficient project management
• Transparent communication
• Monitoring of execution

Our Approach

Accounting Standards Change

Our clients face challenges due to regulatory changes by the standard setters (IASB and FASB)

The challenges

A change process is triggered that could have a broader impact on the organization than just a change in accounting. The most recent example is the new global accounting standard for Revenue Recognition which will apply a single revenue recognition model to all contracts with customers in order to improve comparability within industries, across industries, and across capital markets. This new standard was issued May 28, 2014 and takes a principles-based approach to determining the measurement of revenue and the timing of when it is recognized.

As the challenge is applicable to revenue recognition, clients will face the same challenge for Leasing. Management will also need to perform a comprehensive review of existing contracts, business models, company practices, accounting policies, information technology systems, and internal processes and controls to assess the extent of changes needed as a result of the new standard depending on the industry and applied business models.

Challanges of accounting standards change:

• Establish a governance, project and change management approach

• Inventory revenue arrangements and review contracts

•Review current accounting policies and practices

• Identify relevant differences under the new standard

• Determine adoption method

(retrospective or practical expedient)

• Map accounting policy differences to process and

systems impacts

• Consider dual-GAAP-approach, including interim solutions

• Establish roadmap and communication plan

• Educate and communication within the organization

• Effect process and systems changes

• Collect and convert data, perform calculations

• Draft disclosures (both transition and ongoing)

PwC's solution

Accounting Advisory's service offering isn’t simply about changing the client’s accounting manual; our approach is about making connections and integration. We combine the accounting, IT, process and industry expertise of Accounting Advisory, and Risk Assurance to offer tailor-made solutions, which enable the client to integrate the new standard requirements across the whole organisation.

For certain industries we have developed industry specific approaches to make the implementation manageable. We have also developed project-enabling tools and templates to help clients facilitate implementation projects.

The European Securities and Markets Authority (ESMA) has issued rules for the European Single Electronic Format (ESEF). The new regulation was published in the Official Journal of the European Union 29 May 2019. EU-regulated listed companies must produce their annual reports in the eXtensible HyperText Markup Language (XHTML) for reporting periods beginning on or after 1 January 2020 and International Financial Reporting Standards (IFRS) reporters must use Inline XBRL (iXBRL) to make the consolidated data in the primary financial statements machine-readable.

Companies will need to create tags if they have entity-specific disclosures, for which tags are not available in the ESEF taxonomy. New technical functionality called ‘anchoring’ has been devised to make it easier to understand such XBRL extensions. You can learn more by watching our anchoring webcast. ESEF is already a hot topic for preparers of annual reports and may disrupt the supplier landscape and your current processes.

Further information