Other services

Business valuations

We perform business valuations using the following methods:

• the income approach – discounted cash flows – based on the business’s economic and financial performance to date as well as forecasts prepared by its management, analysed and verified by the valuation professional.

The Discounted Cash Flows method (DCF) results from the assumption that a business is worth as much as the income it will generate over an adopted period after the anticipated return on capital is paid. This valuation method takes into account, to some extent, the so-called intangible assets (not disclosed in the books of the enterprise), such: its market standing, trademarks, licences and patents held, business contacts and customer network, uniquely qualified team of employees, proprietary internal organisation and management system, etc. Cash flows reflect cash balances representing the relationships of the enterprise with its environment (suppliers, customers, employees, institutions).

According to the DCF method, the value of the enterprise equals total cash flows generated by the enterprise adjusted to account for the relevant discount rate which, once put together and added up, represent the combined cash flow remaining at the owners’ disposal.

• the asset-based method – adjusted net assets – prepared with the adjusted balance-sheet data of the enterprise taking into account estimations of the market value of real estate prepared by expert property appraisers (appraisal reports).

The book value is the combined net amount of fixed and current assets financed out of equity, based on current entries in the accounting records, taking into account the current levels of debt and liabilities. For the purposes of the valuation, the value of asset items is updated in line with the principle of prudence and according to the current fair value.

Business transformations

As expert auditors, we draw up opinions regarding the viability of the transformation plan in the process of company transformation, pursuant to the Code of Commercial Partnerships and Companies.

Entities to be transformed may take the legal form of:

• a general partnership,
• a professional partnership,
• a limited partnership,
• a limited joint-stock partnership,
• a limited liability company,
• a joint-stock company.

Each of those may be transformed into another entity under commercial law (i.e. a transformed partnership/company).

We also assist in transformations of sole proprietorships into single-shareholder limited liability companies.

Due Diligence

Prior to the acquisition of shares and stock or enterprises as commissioned by legal entities or private individuals, we compile a due diligence analysis procedure for financial and tax areas.

Scope of Due Diligence Procedure:

• Review and analysis of specific items contained in the Profit & Loss Account in subsequent periods.
• Analysis of sales revenues and operating expenditure (by type of operations, direct and indirect costs, depending on data available.)
• Analysis of other operating and financial revenues and expenditures.
• Analysis of key working capital items (liabilities, receivables, stock) with special consideration of the realistic aspect of receivables disclosed as well as usefulness of existing stock in operations.
• Analysis of existing fixed assets. Financial analysis of the Company.
• Conducting interviews with the management and Company representatives in relation to documentation and information submitted.
• Analysis of adequacy of tax settlements, in particular as follows:
  – Materials from tax audits if applicable.
  – Analysis of interpretations from tax authorities if applicable.
  – Analysis of adequacy of settlements on corporate income tax with particular attention to non-deductable costs.
  – Analysis of transactions conducted with related entities.
  – Adequacy of tax settlements.

Tax Documentation Related to Transfer Pricing

The duty to compile tax documentation as well as to determine formal and subject-matter criteria which should be followed is stipulated in article 9a of the Corporate Income Tax Law. In line with article 11 item 4 of the Law, domestic entities are related whereby:

• the domestic entity directly or indirectly participates in managing other domestic entity or in controlling it or holds shares in the equity of a different domestic entity, or
• the same legal entities or private individuals simultenously participate directly or indirectly in managing domestic entities or in controlling them or hold shares in the equity of those entities.