Financial due diligence as the name suggests is an in depth evaluation of the financial management system of a company. It includes the detailed inspection of the company’s internal control system, financial statements of the company, and document flow. The evaluation also includes management reporting data wherein the handing information about the company’s assets and liabilities, structure of expenses, and profits from primary activities, etc.
The AKM Global financial due diligence services involve assessment of the driving factors of the cash flow and maintainable profits for the company. Our process includes investigating the historical data and the future forecasted result of the entity. This process will uncover the hidden liabilities if any and help the investors or potential buyers to get and understanding of the business trend of the target company.
Our Services include the following:
Financial Due Diligence inclusions
Our financial due diligence services help the buyers and investors to assess and evaluate the factors which could have affected the past performance, and which will enhance the future results of the company. There are the inclusions which is necessary for financial due diligence.
Examination of the assets and liabilities:
- Analyzing the structure of assets as well as liabilities.
- Examining the current and non-current assets of the company or business, ascertainment of their value and availability.
Analysis of quality of assets and liabilities:
- Examining the condition of the assets.
Economic and Tax analysis
- Examining the financial independence of a company.
- Analyzing the profits and loss of a company of profits of the enterprise.
- Examining a company’s financial solvency.
- Examining the company’s tax accounting system.
Review the cost management accounting system and financial due diligence
- Examining policies related to accounting adopted by a company.
- Ensuring the correctness and veracity of financial statements.
- Issues that could come up later on during the transaction can be dealt with in advance with the help of financial due diligence.
- An informed decision/negotiation can be taken when both the parties are in tune with the financial position of each other.
- Financial due diligence provides flexibility in the use of deliverables.
- An unbiased opinion from third party helps in enhanced trust for both the parties.
- The potential future position of the entity can be ascertained which will be a crucial deal maker or breaker for both the entities.
Tax Due Diligence :
Tax Due Diligence helps in reducing the risk of acquiring unseen tax liabilities and risk exposures associated with such transaction. Tax Due Diligence is important elements for the various reasons like
- Identification of any material tax exposures
- Validating representations made by the seller
- Validating assumptions in valuation of buyer
- Structuring deal in a tax efficient manner
- Identifying tax saving opportunities
- Understanding the target
Typical direct tax issues which arise in due diligences are
- Penalty and Interest exposure
- Withholding tax implications
Transfer Pricing implications
- Tax exposure on account of business reorganization in the past like merger, demerger, capital restructuring, etc
- Analysis of carry forward of losses after the transaction
- Analysis of availability of tax holidays after the transaction
- Analysis of tax positions on deductions and exemptions claimed
- MAT credit entitlement
- Tax litigation
Typical Direct Tax issues which arise in Due Diligences are:
- Non-payment of service tax under reverse charge as a recipient
Input service distribution
- Utilization of CENVAT
- Services not qualifying as Export
- Service tax on reimbursements
- Payments to related parties
- Incorrect classification of goods
- Non deduction of withholding related to Work Contract Tax
- Incorrect input tax credits
- Pending Status or lost statutory forms
- Incorrect classification of goods
- Issues in area based exemptions
- Valuation of supplies to related entities
- Cenvat credit in relation to trading and exempted activity
- Imports from related parties without Special Valuation Bench order
- Issues under the Foreign Trade Policy and related compliances
- Non-payment of Entry tax/Octroi /LBT
- Non fulfillment of incentive conditions