Financial Due Diligence
Service cost: by appointment
Our definition: Financial Due Diligence
We give buyers a better in-depth understanding of the target business by analysing and validating the target’s financial performance.
Local characteristics: Low informative value and distortion of Ukrainian financial statements
In most cases Ukrainian financial statements are insufficient to conduct a valid Financial Due Diligence.
The reason for this is two-fold: First of all, in Ukraine hardly any company publishes financial statements using international accounting standards. Secondly, Ukrainian financial statements usually only provide a blurred picture, not reflecting the actual financial situation of a company. This can be explained by taking a closer look at the Ukrainian accounting system, where tax minimization and dependence on controlling bodies' requirements are a major driver. Thus, the local companies have no incentive to depict their actual financial performance, and their owners do not find these reports important.
Besides, for the majority of Ukrainian companies, which are founded in the form of Limited Liability Company an obligatory audit does not exist, which leads to further neglect of commercial accounting.
Even though financial reports are required to be handed in to the Ukrainian authorities, the figures are usually not checked for validity, but are only used for statistical research.
Since a simplified taxation system is applied to agricultural companies in Ukraine, most of them do not carry out tax accounting. The data of commercial accounting has practically no impact on taxation which additionally lowers the value of accurate accounting and reporting at an enterprise.
Our solution: Thorough analysis and transparent illustration of the financial performance and on-site evaluation of tangible assets.
Our experts will not only analyse the P&L and the balance sheet of your target company to identify potential opportunities or threats , but they will also search for additional information and evaluate the compliance of the reported data with the actual figures, and, if needed, they will make all necessary adjustments. This involves complementing and commenting on the Ukrainian financial statements so that you will receive a valid appraisal of the target’s actual financial performance giving you a comprehensive understanding of potential deal breakers and a realistic overview of the target’s financial situation.
In addition, industry specific experts visit the target company and asses the value of tangible assets in order to ensure that a fair value is shown on the balance sheet. Intangible assets and contractual rights are assessed by partner law firms.