What our client needed
Our client wanted to invest in the agricultural sector in Ukraine. He identified several target companies. As he was not experienced in the Ukrainian business practices and accounting standards he was searching for a reliable partner who could provide a transparent picture of the business and identify potential tax and financial risks.
How we added value
After analysis of the accounting data we identified several significant inconsistencies in accounting with respect to accounting not showing the real picture of the business.
In order to get a better understanding of these inconsistencies we interviewed key people (head of accounting, directors) and cross-checked received information. In addition we cross-checked this information with general results of other agricultural companies (Benchmarking).
Then we sent an agriculture expert to the company. He assessed the value of fixed assets and estimated how much harvest is reasonable to be expected on given land plots.
Via triangulation of all these data sources we could clearly demonstrate/(conclusively) prove that the official annual report doesn’t show the true financial situation, and what is more, that accounting practices were partly against the UA GAAP and tax laws. For example there occurred many cash transactions which were not shown in accounting. Harvest was sold in cash and items were bought in cash. As a result the real revenues and profits are higher than stated in the accounting.
The agricultural expert assessed the remaining expected usefulness of the agricultural equipment. This allowed to estimate the investments necessary in the near future.
An in-depth analysis of the accounting revealed that similar fixed assets where handled differently in accounting. This generally deteriorates the comparability of figures from year to year. We rectified the distorted numbers.
Finally, we compiled a detailed report of 60 pages including a concise management summary in which a picture of the real financial situation was outlined.
The investor became a long-term client. We now restructure his agricultural companies in terms of accounting and management reporting. We have established there a clear accounting policy that ensures that figures from different accounting periods are comparable and provide information useful for decision making. Based on these reliable accounting figures we develop tailor-made management reports that can be generated automatically by the accounting system.