Accounting and Tax Due Diligence in Asset Recycling

Besides the technical, commercial, financial and legal due diligence, other assessment includes accounting and tax due diligence, which should consider the following:

Accounting due diligence

• Identify if the relevant accounting standard has been properly applied.
• Identify and recognize change of accounting treatment over the period of historical financial statements.
• Review and revise (when necessary) the proforma financial statements or other reports.
• Perform high-level quantitative adjustments to related accounts when necessary.
• Conduct a qualitative accounting impact analysis related to relevant accounting standard.

Tax due diligence

• Assessment of how tax affairs are being managed and understand any past tax-related issues (if any),
• Identify any industry-level tax issues and any tax issues related to the operation of the asset.
• Assessment of the asset’s exposure to relevant taxes and other potential exposure on related party transactions.
• Understand carry-forward tax loss position, composition and the extent these can be utilized.
• Review the outcome of the latest tax audits of the asset to determine risk levels within the business.