-
Audit of annual and consolidated financial statements
Objectivity, expertise and experience are crucial when it comes to assurance services. And above all developing a strong working relationship with our clients is the foundation of our service approach.
-
Assurance related advisory services
Assurance related advisory services are based on the knowledge and expertise that are the staff of life of our auditors.
-
Global audit technology
We apply our global audit methodology through an integrated set of software Tools.
-
Accounting related consulting
Accounting in accordance with UGB, US-GAAP or IFRS is in constant motion. The integration of new regulations into their own accounting systems poses special challenges for companies.
-
Corporate Taxes
Experts at Grant Thornton Unitreu have many years of experience and provide the full spectrum of tax services. They are familiar with the specifics of the Austrian market in all aspects of tax and economic law. Tax consultants at Grant Thornton Unitreu take pride in developing and concluding effective and individual solutions.s.
-
International Tax
Our teams have in-depth knowledge of the relationship between domestic and international tax laws.
-
Transfer pricing
The laws surrounding transfer pricing are becoming ever more complex, as tax affairs of multinational companies are facing scrutiny from media, regulators and the public
-
Value Added Tax (VAT)
Experts at Grant Thornton Unitreu have many years of experience and provide the full spectrum of tax services. They are familiar with the specifics of the Austrian market in all aspects of tax and economic law. Tax consultants at Grant Thornton Unitreu take pride in developing and concluding effective and individual solutions.s.
-
Private Wealth
Our experienced Private Wealth Team distinguishes itself through its long-term and trustworthy advice to private clients, owner-managed companies and private foundations.
-
Real Estate Consulting
Real estate, buy-side tax due diligence when purchasing real estate by (i) acquiring shares in real estate companies (share deal) or by (ii) purchasing real estate directly (asset deal)
-
Global Mobility Services
Assignment management is a task with many aspects and many contact persons. For successful expatriate management you need not only a local tax consultant, but a network, which successfully cooperates across borders. Grant Thornton has member companies in more than 130 countries with Global Mobility experts who regularly exchange information.
-
Bookkeeping & Financial accounting
Financial accounting is the basis for many decisions in the company. Only those who prepare their figures clearly and get a good overview of their company can recognize weak points in time and react to negative developments. The use of state-of-the-art software (BMD) allows you to access your figures at any time. Digital document management and a document management system for data archiving are a matter of course. We take care of your financial accounting.
-
Preparation of annual & consolidated financial statements
Depending on the size of your company and the legal form chosen, you are obliged to prepare annual financial statements. In addition, shareholders, owners and management want to be provided with financial information on a regular basis. We support you in fulfilling your recording obligations and thus ensure that you present companies, the bank and other addressees with meaningful and reliable figures.
-
Payroll Services
Payroll services are among the subject areas that are changing rapidly and constantly gaining in complexity. This is where tax law, social security law, labour law, residence law and other legal matters come together. Our experts will help your team to stay up-to-date and solve complex issues. But we are also happy to take care of your entire payroll accounting.
-
Tax Compliance
Tax authorities keep entrepreneurs and freelancers constantly engaged with tax issues, so they play a central role in almost every business decision. Depending on your needs, our services range from the preparation of tax returns, the execution of tax calculations with a thorough review of the data as a basis for assessment, to international tax compliance for several countries.
-
Robotic Process Automation (RPA)
Robotic Process Automation (RPA) is a software-based technology that mimics a series of activities within and between systems based on a set of instructions typically to complete a process.
-
Valuation
Our business consulting services can help you improve your operational performance and productivity, adding value throughout your growth life cycle.
-
Transaction Support
We can support you throughout the transaction process – helping achieve the best possible outcome at the point of the transaction and in the longer term.
-
Merger & Acquisition
M&A, Merger & Acquisition
-
Restructuring & Going Concern Forecast
Recovery & Reorganization
-
IT Audit
Increasing networking and digitalisation are bringing about far-reaching changes in the business world. Modern accounting is no longer conceivable without complex IT systems. At the same time, however, this also increases the risks for companies, especially when handling data. Confidentiality, availability and integrity of data are central security requirements that must also be met with regard to the correctness of IT-supported accounting. Our IT auditors are experts in operational IT operations and develop targeted measures for you to counteract risks and to check the security and reliability of your IT systems.
-
Internal Audit
Internal Audit helps companies and organisations to achieve their goals by analysing and evaluating the effectiveness of risk management, controls and management and monitoring processes. Internal Audit focuses on independent and objective audit (assurance) and consulting services that improve the value creation and business activities of your company.
-
Special Attestation
At present, practically all types of IT services can be outsourced to service providers. Advancing technological developments, especially the possibilities for virtualizing server systems, are a major driver for companies to increasingly outsource IT services. Frequently, nested outsourcing structures can also be found in which service companies outsource certain IT services to subcontractors.
-
Expert dispute resolution & advisory
Grant Thornton Austria offers comprehensive services in the field of business-oriented expert services with a broad range of competencies from banking to communication. The core activity of experts is the objective recording of findings and the preparation of expert opinions - regardless of all external circumstances. Our experts Gottwald Kranebitter and Georg H. Jeitler, as sworn and court-certified experts, ensure that the highest professional standards and the principle of objectivity are observed.
-
Crisis Management
Crisis Management
-
Blockchain & Crypto-Assets
Blockchain as a carrier technology for crypto currencies and smart contracts, among other things, is becoming increasingly important. Grant Thornton Austria offers comprehensive audit and confirmation services for block chain technologies and business models.
-
Corporate & Brand Strategy
We can support you throughout the transaction process – helping achieve the best possible outcome at the point of the transaction and in the longer term.
Our ‘Insights into IFRS 3’ series summarises the key areas of the Standard, highlighting aspects that are challenging to interpret and apply in practice. This article follows on from our published article ‘Insights into IFRS 3 – Identifying the acquirer’ and presents guidance for an area which is difficult in practice – reverse acquisitions.
Our ‘Insights into IFRS 3’ series summarises the key areas of the Standard. Download the full article or read on for more information.
What is a reverse acquisition?
A reverse acquisition occurs when an entity that issues securities (the legal parent or the legal acquirer) is identified as the accounting acquiree, and accordingly, the legal subsidiary (or the legal acquiree) is identified as the accounting acquirer.
One situation in which reverse acquisitions often arise is when a private operating entity wants a fast-track to a public listing. To accomplish this, the private entity arranges for its equity interests to be acquired by a smaller, publicly listed entity. The listed entity carries out the acquisition by issuing shares to the shareholders of the private operating entity. After the exchange of shares, the former shareholders of the private entity, as a group, hold the majority of the voting rights of the combined entity. In addition, the former shareholders of the private entity then appoint the majority of the members of the new combined entity’s board. In this case, although the publicly listed entity issued shares to acquire the private entity, the listed entity will be identified as the accounting acquiree and the private entity as the accounting acquirer as the former shareholders of the private entity, as a group, have obtained the control over the combined entity.
This is explained in the following diagram:
Is the reverse acquisition transaction a business combination?
Answering this question involves determining:
- which company is the ‘accounting acquirer’ under IFRS 3, ie the company that obtains effective control over the other, and
- whether or not the acquired company (ie the ‘accounting acquiree’) is a business as defined in IFRS 3.
Identifying the acquirer
When a transaction between entities is carried out primarily by exchanging shares, the entity that obtains the control over the other entity is the accounting acquirer. Although IFRS 3 indicates to use the guidance in IFRS 10 to identify such acquirer, in practice, the factors listed in IFRS 3 with regards to the transactions effected by an exchange of equity interests should also be analysed. Refer to our article ‘Insights into IFRS 3 – Identifying the acquirer’ for more details on this guidance.
The following facts and circumstances are likely to indicate the legal subsidiary is the accounting acquirer:
- the former shareholders of the legal subsidiary, as a group, retain or receive the largest portion of the voting rights in the new combined entity (which include potential voting rights that could be exercised)
- the relative size (measured in, for example, assets, revenues or profit) of the legal subsidiary is significantly greater than that of the legal parent
- the former owners or managers of the legal subsidiary dominate the composition of the governing body or senior management of the combined entity.
PRACTICAL INSIGHT
-
The IFRS Interpretations Committee (IFRIC) received a request to clarify whether a business (legally acquired) that is not a legal entity could be considered to be the accounting acquirer in a reverse acquisition under IFRS 3. In September 2011, the IFRIC observed that IFRS standards do not require a ‘reporting entity’ to be a legal entity. Therefore, an acquirer that is a ‘reporting entity’ but not a legal entity can be considered to be an accounting acquirer in a reverse acquisition. This IFRIC decision has raised some issues in practice on how to determine the boundaries of the assets and liabilities of the business and the nature of the equity that is transferred.
What if the legal acquirer transfers also cash?
When a legal parent pays cash to acquire shares in a subsidiary the transaction would normally be accounted for as a regular business combination, ie considering the entity that is transferring cash is the acquirer. However, in some circumstances the business combination can still be considered a reverse acquisition even if cash is transferred from the legal parent to the owners of the legal subsidiary where other facts demonstrate the legal subsidiary is finally the accounting acquirer.
An important determining factor in identifying the acquirer is control. When it is clear as part of this transaction the legal subsidiary has obtained control over the legal parent (in accordance with the definition of control as stated in IFRS 10 ‘Consolidated Financial Statements’), the transaction should then be accounted for as a reverse acquisition. While this is a possible scenario, and one that can be challenging to deal with in practice, we do not believe reverse acquisitions with a payment in cash are common in practice.
What is a business?
This is one of the most commonly asked application questions in practice, in part because the answer makes a significant difference to how the transaction is accounted for. IFRS 3 includes both a definition of a business and some detailed supporting guidance.
What are the minimum requirements to meet the definition of a business?
IFRS 3 acknowledges that despite most businesses having outputs, outputs are not necessary for an integrated set of assets and activities to qualify as a business. In order to meet the definition of a business, the acquired set of activities and assets must have as a minimum an input and a substantive process that can collectively significantly contribute to the creation of outputs.
DEFINITION
-
A business is defined as ‘An integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing goods or services to customers, generating investment income (such as dividends or interest) or generating other income from ordinary activities.’
Furthermore, IFRS 3 includes an optional concentration test that could be relevant in the present context. Refer to our article ‘Insights into IFRS 3 – Definition of a business’ for more details, Including how to apply the optional concentration test. In our view, a listed shell company that has no current substantive operations, and whose activities mainly involved managing its cash balances and filing obligations, would not meet the criteria of a business. This is because it has no substantive processes. For this reason, we consider many transactions in which a private operating company arranges to be acquired by a listed shell company are not business combinations and therefore fall outside the scope of IFRS 3.
How to account for a reverse acquisition
The following diagram illustrates the two possible accounting treatments, with reference to the relevant publications, when facing a reverse acquisition:
How we can help
We hope you find the information in this article helpful in giving you some insight into IFRS 3. If you would like to discuss any of the points raised, please speak to our experts Christoph Zimmel and Rita Gugl.
