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We are a private Ukrainian professional practice based in Kiev since 1998. Our primal field of expertise captures audit, accounting, business and tax consulting and we have extensive expertise in transactions support, crisis reorganization and management, financial advisory services and business consulting.

Alt is a private Ukrainian professional practice based in Kiev since 1998. Our primal field of expertise captures audit, accounting, business and tax consulting. Basically, this is a standard range of services for any professional practice. The matter of real difference comes to the point what we all mean behind these words. Putting aside the adjectives in superlative degree, I will just outline my understanding of the profession and its prospects in Ukraine.

Making business in Ukraine besides normal entrepreneurial risk also means taking high risk of uncertainty. That uncertainty is caused by various factors: undeveloped business community, low general business culture, political instability, obscure and drastic changes in legislation, raiders attacks and a lot of others. I am deeply convinced that the first objective of the profession is to minimize the effect of uncertainty on decision-making process. This site is just one small step in this direction.

In the modern world the business success is no longer a question of luck but instead a question of planning, management, control, and motivation. The times when audit practices were concentrated just on performance of their public function of external audit have been irretrievably gone. I am more than sure that the future of the profession lies in the area of business consulting and its modifications. To become a business advisor requires not only highest professional qualification and significant experience but also a right attitude as a must condition. Real consulting is only possible when I understand the client's business as well as my own and try to produce more than I am asked for. Consulting should generate new ideas, management tools and business processes creating in this way competitive advantage for the business. Any business can be viewed as a mixture of culture, technology, people and other resources. As a result, the tool perfectly working for one business may appear to be useless for another one.

The professionals of highest calibre in Ukraine nowadays are concentrated mainly in corporate sector but not in public. This fact can be explained by a relatively low demand on the market for independent business advice. But the real problem is that the proposition is even lower. The great majority of Ukrainian audit and consulting practices just buried themselves into external audits and tax returns not even trying to go further. It's obvious that "further" means change of philosophy, investments in qualification, practical experience, tools and procedures to approach a client with an idea of business related advice. It would not be quite true to say that our consulting department outnumbers the audit one but we are looking at and moving in that direction. Thus, just do not be surprised when we knock at your door very soon. All that we ask you for is to open it and give us a chance to understand your business and improve its performance.

We do not sell connections with "the strong" or connections "to settle" the problem. What we do sell is the result on paper which has value in client's eyes. We do have procedures and policies but they are not set up by the distant Head Office; instead they are adjusted for every client if the better result requires so. We do not execute the orders but express our independent opinion and provide practical recommendations. From the number of clients which contracted us once we have retained 90% for continuous engagements. This optimistic rate is being achieved due to one general perception we imply in our work: business success of our clients directly affects our business success. This simple perception basically gives you a very practical tool how to identify a good business consultant on the market. If your consultants have a well-organized growing practice, it is more likely that they have loyal successful clients and you can be just one of them.

• Accounting services
• Audit and assurance
• Business restructuring
• Business taxation
• Business valuation
• Consulting services
• External audit
• Internal audit
• International taxation
• Mergers and acquisitions
• Payroll services
• Personal tax

Audit & Assurance

External Audit
The main Ukrainian audit regulatory independent body Audit Chamber of Ukraine on the 18.04.2003 issued the Resolution by which the International Standards on Auditing (ISA) were introduced as compliance requirement for all certified auditors of Ukraine.

According to Ukrainian legislation only the public limited companies, companies with loan stock in issue and financial institutions (banks, investment funds, private pension funds, dealers in securities and insurance companies) are subject to statutory annual audit to be performed by certified auditor(s). These businesses present their financial reporting information to the general public that is a compulsory legislation requirement. Analyzing the trend of audit services market development we can state that more and more Ukrainian businesses have their corporate financial reports audited for compliance with International Financial Reporting Standards (IFRS).

In the modern competitive economy every business faces a problem how to increase its value. The audit performed by certified auditors, in its fundamental sense, gives an assurance that the financial statements of a business satisfy the requirements of a certain regulatory framework. Such assurance is then passed over to investors, lenders, creditors, clients and general public increasing the value of the business in their eyes.

More and more Ukrainian companies are seeking financing on the local and international financial markets and successfully obtain it using audited financial reporting as a competitive advantage. The fairness of financial information reported is a crucial factor in gaining access to capital markets. In this sense of the audit an image, rating and brand name of the auditor effect the level of assurance and, therefore, the price of the audit. In result of such audit the client receives an Independent Auditor's Opinion Report on whether the financial statements of the business give a true and fair view and satisfy the requirements of a certain regulatory framework (NASs, IFRSs, US or UK GAAP).

Alt has developed a unique approach to the audit process which ensures the close contact with the client's management making them important part of the process and maximizing their contribution.

Being independent auditors, we are open to the client with our procedures, evaluations and tests. Our objective is to ensure constant awareness of management of what we do and why this particular piece of information is required for the audit. The audit, as any other process that engages people, can be a piece of art created by its participants.

Our audit process encompasses the following stages:

• composing audit plan and program;
• gathering business related information: corporate structure, revenue making activities description, segmenting the business by products, services and geographical areas, margin evaluation by segments, structure of main assets, liabilities and working capital, main competitors and market share, prices fluctuation, equity structure, accounting policy, corporate reporting requirements, future forecasts and business plans and other important information;
• analytical review of the general business related information with the objective to evaluate the business risk;
• adjusting audit program taking into account the areas associated with highest business risks;
• system of internal control identification and testing; evaluation of risk of internal control system failure;
• accounting policy review and tests of its proper practical application;
• analysis of key performance indicators used by management and their effect on the financial statements;
• use analytical and data analysis procedures to provide audit evidence from which we gain significant audit assurance or identify areas requiring further investigation;
• organization and performance of reconciliations with customers, vendors and creditors, assets existence tests, evaluation and possible impairment checks, checks of material transactions for their support with proper source documents and contracts;
• review of post balance sheet and contingent events for their possible impact on the financial reporting;
• review the financial statements and notes to them for information disclosure compliance requirements;
• organization of the final internal analytical review of audit results and then communicating them to the client;
• issue of an Independent Auditor's Opinion Report.

Business Assurance
The terms "assurance" and "audit" overlap each other, but assurance has got a much wider meaning. The auditors can give assurance to the clients that any of their business processes work effectively and produce expected results. Some of those business processes (e.g. inventory stocktaking or credit control policy) are reviewed and evaluated by the auditors in course of the audit to come up with the objective and justified opinion on fairness of information presented in financial reporting. But assurance can be given by auditors regarding any business process as a separate service beyond the standard audit engagement.

Alt provides a wide range of assurance services to our clients:

• reviews of financial information;
• reviews according to agreed-upon procedures;
• compilation of required financial information;
• internal control system procedures design.

Internal audit
Audit may also create an internal value for the business and its management. The auditors are independent and very often new experts for the business and their professional analysis and recommendations may help the shareholders and management look at their business from another angle. A good auditor should understand the client's business and evaluate it from the standpoint of reliability of internal control system and technology, effectiveness of management and competitiveness on the market. Thus, there is no surprise that the auditors may create value for the business in their Internal Management Report. This value is no longer driven by the brand name of the auditors but instead exclusively depends upon their qualification and attitude.

Alt has obtained a great experience of creating additional value to our internal audit clients. In conditions of fast developing economy and unsettled market the great majority of companies very often have their business processes disorganized and uncontrolled. Sooner or later some of such processes become real bottlenecks for further business development or expose the business to a great level of quite avoidable risk.

Our internal audits quite often reveal not cost effective and underperforming functions which, if optimized, cause significant cost savings for the business. The experts of our internal audit team are always industry focused and equipped with a great variety of management tools. Since every business process engages client's staff and technology some of our internal audits end up with training programs for management.

Auditors' Independence
Summarizing the above statements it should be clear now that an audit creates at least 2 (two) kind of values for the business: external (public) and internal.

The main risk for the auditor performing its public function is to issue a wrong opinion about the fairness of financial information presented by the client. But when performing its internal function the main risk comes to producing a report of low quality or giving a wrong business advice to the client. The significance of these risks and possible outcome for the auditors are so different that it basically splits the modern audit profession by two parts: public oriented and client oriented. As a general advice, we would recommend to engage different auditors for performance of their external and internal functions. Such decision may be more cost effective and almost certainly maximizes the internal value of audit for your business.

Moreover, if internal and external audits are performed by the same auditors the issue of auditors' independence clearly arises. This issue comes to the point that such auditors can not be completely free in their judgments and risk evaluation if they advise client on the issues of information system design, internal control procedures and business processes optimization. If client implements such advice the auditors, in essence, will audit how the client has realized the practical implementation instead of auditing information system and internal controls themselves.

This problem of external auditors independence has always accompanied the audit profession and reached its critical point in the beginning of this century in result of overwhelming external auditors' failures in the US and UK. Affecting the corporate governance compliance programs the Sarbanes-Oxley Act of 2002 (the Act) has introduced a direct ban for some other outsourced services which could potentially be rendered by external auditors in the USA. The services of bookkeeping, financial information system design, appraisal or valuation, internal auditing, human resource and legal consulting are among others prohibited for auditors to be rendered to their external audit clients.

The International Standards on Auditing (ISA) in their Code of Ethics for Professional Accountants (the Code) also address the issue of external auditors independence. But the statements of the Code are more of explanatory and recommendatory nature than the rules for strict compliance. Regardless of no direct ban the Code recognizes the problem and recommends the auditors to avoid the potential risk of independence conflict. The Ukrainian legislation, besides professional regulation in face of the ISA, keeps silent on this particular aspect.

Being a Ukrainian legal entity and, as such, not a subject to the Act's compliance requirements, Alt, nevertheless, DOES NOT perform the services of accounting and internal audit to our external audit clients.

Tax

Tax Audit
As prescribed by the legislation, VAT, Corporate Tax returns and other tax reports are signed by managing directors and chief accountants (if any) of all Ukrainian companies. The chief accountant becomes a responsible person for the tax accounting organization and reporting.

But the managing directors, as a rule, are not tax experts and concentrated mainly on sales, operations and technology. As a result, they delegate the technical side of tax reporting to chief accountants at the same time retaining full responsibility for its correctness. By doing so, the directors accept a personal risk which they quite often decide to minimize through an instrument of tax audit. Such audit engagement, basically, presumes the audit of chief accountant's work for a defined period.

The tax experts of Alt always demonstrate excellent performance in evaluating tax accounting organization system. Our experience suggests that at least a half of errors in tax returns are caused by defects of the system and another half by the personal factor.

In result of tax audit our clients obtained the detailed Internal Management Report with the following sections:

• Tax accounting organization system description: defects and weaknesses identified and recommendations on system's improvement;
• Chief accountant's and other accounting staff qualification evaluation;
• Errors and missing documents listing with our recommendations on their adjustments;
• Potential tax risks associated with particular transactions, contracts or decisions;
• General evaluation of tax position.

Tax Consulting
The tax regulatory framework of Ukraine can be characterized as quite complicated and containing a significant number of ambiguous and contradictory provisions.

The practical application of any tax law since it becomes effective is then monitored by the Sate Tax Administration and its regional departments. This body, as a rule, applies quite a fiscal approach in its interpretations of legislation. It would not be a big surprise for a tax collecting body but this fiscal approach often depraves the motive and general idea of the law makers creating a gap between the wording of legislation and its practical application. In ideal law making process the practice should reveal all the defects of the wording and stimulate amendments to its current reduction narrowing the gap in this way. Such an approach makes the changes consistent and anticipated.

Unfortunately, there is no Tax Review Panel in Ukraine or any other professional body which would absorb and analyze all the practical issues associated with a particular tax rule. As a result, tax legislation gets often rewritten completely creating new problems instead of being just amended and improved.

The Ukrainian tax rules are not presented in one uniform Code but instead are gathered in at least of a dozen of separate legislation acts. Those laws then find their further explanations and practical treatments in hundreds of Resolutions, Decrees, Orders and Letters.

The main sources of tax legislation in Ukraine are listed below:

• Law on Value Added Tax;
• Law on Corporate Tax;
• Law on Tax Liabilities Settlements of Taxpayers to the Budgets and Special Funds;
• Law on Personal Income Tax;
• Law on System of Taxation;
• Decree of the President on Eased Tax, Accounting and Reporting Regime for Small Business.

Alt's tax advice is always integral. Our approach incorporates accounting, legal, economic and corporate issues in one general tax advice. We provide a range of tax effective and innovative solutions which are in full compliance with existing regulations and directed to minimize the tax burden on client's business.

We also assist our clients to resolve disputes with the State Tax Administration through direct negotiations, appealing procedure within STA or independent courts resolutions.

The standard areas of taxation our tax department is dealing with on a daily basis are listed below:

Indirect taxes
Such indirect taxes as VAT, Excise tax and Customs duties have a significant effect on the gross margin and cash flows of the business. That's why the optimized supply chain and margin allocation within the corporate structure leads to cash-flow savings and profitability increase.

The Ukrainian VAT legislation for import/export transactions is so vulnerable to different interpretations that often one key word in the contract changes your VAT rate from 20% to 0% or vice versa.

Payroll and personal taxation
It does not matter whether you are a global employer or an individual obtaining personal income in Ukraine we are always available to provide you with a unique solution. We will assist you in structuring your employment and remuneration schemes as well as in introduction of bonus and evaluation systems. If you travel quite a lot to Ukraine or make personal investments here you can always rely on our professional expertise in finding the best tax solution for your particular situation.

International tax
In conditions of constantly and rapidly evolving international tax environment we present you a variety of creative ideas and cross-border solutions. One of the first challenges for a global business with developed corporate structure is to reduce the overall effective tax rate. For a foreign business when considering an investment project in Ukraine the tax effect may be the crucial factor for a final decision.

Our experience in all major industries of Ukrainian economy guaranties the most intelligent tax advice in complicated import/export commercial transactions. We also have a unique practical experience in developing the cross-border transfer pricing strategy for our clients.

Tax planning
In order not to have a tax liability in your tax return a big surprise at the moment of its signing any business should have a solid tax planning system. Ideally, the tax expense is to be controlled as part of the general budget vs. actual variance analysis. If such practice is introduced the amount of tax expense for a particular reporting period could be altered with a range of instruments.

Our experts can be engaged in development of that part of your information system that is responsible for tax planning and control.

Deferred tax
The deferred tax is an area of accounting where both tax and financial results are compared with each other to identify the temporary differences. To determine a deferred tax evaluation in balance sheet and its effect on the tax charge in income statement presumes understanding of its economic substance as well as skills in its practical calculation. For a business with diversified activities this evaluation may represent a quite material amount and have a significant effect on their financial result for a period and dividends policy.

The deferred tax is the most difficult area for Ukrainian accountants since its internal calculation has no documentary support and requires their personal evaluation. Due to the absence of any strict instructions how to derive this evaluation they often ignore it completely in their final accounts.

The experts of Alt's tax department will not just assist your accountant in calculating the deferred tax evaluation but introduce a special format and reconciliation procedure. Your accountant will then be trained to understand the format, objective of reconciliation and double entries.

Human Capital
Alt positions itself as your reliable guide on the dynamic employment market of finance, tax and accounting in Ukraine. The human resources are recognized to be the most valuable assets of any business. Looking simple at a first glance the recruitment process, without any doubt, should be regarded as the most sensitive and interesting area of consulting. Each business is a unique organization with its own culture of management and job requirements. We listen carefully to our client and try to find an individual which would perfectly fit the position available.

The potential candidates get selected, interviewed and then go through our internal management evaluation program. This program is directed to determine a level of professional qualification as well as a psychological type of the candidate. The key element of the program is a written test developed by our experts for each position. The content of this test is discussed with the client and amended if candidate is supposed to demonstrate knowledge of specific professional area or experience in particular exercise.

We provide services of recruitment in the field of our expertise only.The list of typical positions we can select, interview and evaluate is given below:

• Financial director (controller);
• Auditor;
• Internal auditor;
• Financial manager;
• Tax manager;
• Investment projects analyst;
• Chief accountant;
• Accountant.

Transactions Support
Seeking the best trade-off between capital gain and investment income the investors may take a variety of decisions. Those of them related to acquisitions and disposals, new ventures and projects, management buyouts and spin-offs are associated with the great risk for both management and shareholders.

The time factor is also of paramount importance: these decisions have a long-term effect and may be right strategically but exhausting for the business in the nearest future. Every project should be considered simultaneously as an opportunity not to be missed and as a risk to deteriorate the current situation.

Being always an industry focused, Alt's professionals offer you not just a one-time strategic advice but a range of practical services to monitor the project over its life or up to the point of its full integration into the business.

Mergers & Acquisitions
In M&A deals we represent both sellers and buyers. We have no doubt that, as a potential buyer, you know the business of your target well enough to manage its seamless integration into your current corporate structure. You clearly identify the benefits and synergy effect of the acquisition. But our due diligence report may disclose so significant legal, tax and financial risks associated with the target that your vision of the deal may be changed drastically from potentially positive to completely negative.

Each M&A project is different and a lot will depend on willingness of the target's management to cooperate but, as a general pattern, our due diligence report captures the following points:

• Shareholders structure and share capital valuations and contributions;
• History and legal analysis of privatization, if any;
• Corporate structure and dividends policy;
• Legal analysis of registration documents, amendments and key shareholders decisions;
• List of activities review for the presence of necessary patents and licenses;
• Review of all material contracts and their effect on recurring cash flows;
• Personnel structure and key management evaluation;
• Insurance and leasing contracts legal and financial analysis;
• Historical financial position, results and their trend analysis;
• Accounting policy description;
• Information system and accounting database evaluation;
• Internal control system description and evaluation;
• Quality of assets and recurring cash flows analysis;
• Market value of key assets evaluation;
• Working capital analysis in dynamic and ratio trend analysis;
• Recorded and off-balance sheet liabilities description and evaluation;
• Equity items description and analysis;
• Financial reporting adjustments evaluation to comply with the NASs, IFRSs, US or UK GAAP;
• Profitability trend analysis and the effect of most sensitive items;
• Application of valuation tools: DCF analysis, payback period, rate of investment return, etc.
• Pricing and market share evaluation by segments of the business;
• Gross profit analysis in dynamic by segments;
• Production process and technology description;
• Cost structure, profitability by types of products (services) and variance analysis;
• Tax position and tax burden trend analysis;
• Audit of tax calculations and reporting discipline;
• Litigations and contingent events description;
• General evaluation of the target and synergy effect in result of acquisition;
• Potential market reaction and effect on shareholders value;
• Key financial, tax, legal and business risks description and evaluation.

As it is mentioned above, our due diligence report may alter your decision completely or have a significant effect on the price of the deal. Representing you, as a buyer, in result of our due diligence analysis we then conduct valuation of the deal, assist you in price negotiations and other terms of the deal and prepare legal documents to finalize the transaction.

Using our good and long-term relationships with local and international financial institutions and private investors we then can assist you in financial capital raising including both equity and debt financing.

Representing the seller usually includes the following stages:

• Preparation of information memorandum for the potential buyers or investors;
• Valuation of the business using different tools: DCF analysis, payback period, rate of investment return, etc.
• Search and negotiations with potential buyers on transaction terms;
• Preparation of legal documents to finalize the transaction.

Our corporate finance department is also specializing on individual solutions for private investors how to sell their stake in the business or to exit from the company realizing their interest to existing shareholders.

Post Deal Services
The first year after M&A deal is regarded as the most risky period for the buyer. The risk is mostly associated with the efforts to affect the target in a way to realize the deal's objectives. Being under the pressure the target may react adversely to fundamental changes.

Alt's management consulting team is fully equipped with relevant experience to achieve the target within limited time period. The process of integration is highly driven by the motivational factors and fair success measurement system. We provide services of short-term planning, control and actual performance measurement.

We also can assist you in developing evaluation model to control the key drivers of post deal performance.

Project Finance & Monitoring
If we distinguish a business between daily and project, the common trend suggests that the daily part is much better organized and supported by the technological and human resources.

Some businesses enter the projects without any preliminary feasibility study in hope that it will be somehow realized. Our practice suggests that in some cases it will not.

Moreover, poorly controlled projects may destroy the daily business due to chaotic resources re-allocation within the organization. The history knows a lot of examples when failure to realize a big long-term project killed very healthy and reliable businesses.

Alt offers you the services of project's feasibility analysis, its presentation to potential investors and post-deal monitoring. When your business does not have enough resources to realize a project it is not a reason to give up. The management resources can be outsourced and the financial resources attracted if the project is economically and technologically feasible.

Our corporate finance team is always industry focused and experienced not only in feasibility analysis but also in monitoring the project's realization at all its key stages. If the project does not meet your expectation or becomes loss making at some stage our experts will recommend you the most efficient way to exit or shut it down.

Crisis & Reorganisation Management

Reorganization Advisory Services
Reorganization may be implemented either to recover under-performing business or as an instrument to increase shareholders' value.

As a rule, it includes changes in shareholders' structure, mergers, spin-offs, split-ups, management buyouts or debt to equity restructuring. The need to reorganize a business may be caused not only by the crisis but also by marketing, management or even political factors.

When reaching significant size some businesses face important bottlenecks on the way of their further development. The changes in management, debt and capital structure might be the only solution in this situation. When you consider the options for reorganization it looks like the right time for an independent professional advice.

As a first step, we offer the complex analysis of the situation with all the risks and benefits evaluation. If the reorganization is a real answer to your situation it should be treated as a separate project with time limits.

Alt's group of experts will then present you a complete schedule of actions with detailed analysis of their legal, tax, corporate governance and valuation impact. We closely monitor the reorganization process to keep it within the time schedule and measure its effect on every stage. As long as you have triggered the process it is now time for quick and well-coordinated decisions under close independent control.

Crisis Management & Business Recovery
The business just like people is sometimes in poor health. It could be a real test for the management, shareholders, creditors, lenders and other stakeholders of such a business. We believe it is not time to argue about the reasons that have led to the crisis and be stuck with mutual accusations. We also believe it is not time to take what has been left and run.

Our experience suggests that it is time to listen to each other, to think and to take the optimal decisions for all the parties engaged in the business. First of all, the status quo should be carefully analyzed and understood by all the parties. Then the future expectations are to be reconciled. As long as you know where you are the next step comes to the recovery program design.

Whatever is the reason of crisis - drastic drop in sales, cash flow shortage, wrong investment policy or internal management conflict - it is very important for the stakeholders to tackle it as one team. However, it is always a dilemma for the stakeholders to invest more in the under-performing business or to exit now and recognize losses whatever they are at the moment.

When facing a dilemma of this kind to apply for independent professional advice looks like a very reasonable decision. When your business is in trouble it is time to go to those who you trust.

Alt will develop for you a range of investigative procedures and rescue or turnaround solutions. Our clients could be lenders, creditors, shareholders or management of the business that is in trouble. We will assist you in better understanding of the financial and marketing position of the business, the reasons of its poor performance and key business risks associated with its recovery program. In case of a conflict between management and shareholders we guarantee for the latter our full support and the best negotiation tactic directed to defend your investments.

If the crisis or conflict is so deep that insolvency looks like the only outcome Alt's insolvency department offers you the full range of services to preserve your best interests and minimize losses.

Investigations & Forensic Services
The fraud and management's failure to preserve the best interests of shareholders, unfortunately, often become a part of daily business operations. Even the most technologically perfect systems of internal control get helpless if there is a collusion between key managers within the organization. The fraudulent behavior of management, apart from financial losses, may cause significant damage to the business's image and reputation.

The standard service of audit does not guarantee identification of the fraud or the facts of improper behavior due to fundamental assumption of the audit that there are none of those in the organization on default. To reveal such facts a special assignment should be given to a team of qualified and trained investigators.

Our investigation and forensic accounting department has demonstrated its perfect skills, computer technology and business understanding in some loud precedents of fraud and deceiving behavior in Ukraine.

We provide services of financial losses and missed opportunities evaluation for the companies involved in litigation or arbitration processes. Our strictly confidential investigations include the fraud identification and evaluation, computer forensics, intellectual property, money laundering and fraudulent bankruptcy.

We also assist our clients in insolvency and bankruptcy cases making important valuations as well as analytical and marketing research.

Consolidation of Financial Statements
According to publicly available information every fourth Ukrainian legal entity marks itself in questionnaire surveys as a group member.

To prepare consolidated financial statements of a group of companies may appear to be quite a hard exercise if the information systems of all the group members are not designed properly to supply regular and reconciled data for consolidation. The accounting policies applied by the group members should also be unified in line with the corporate reporting standards.

The consolidation technique represents a set of standard adjustments the complexity of which is driven by the factors like the number of companies in a group, nature of intercompany transactions, unrealized profits, minority interest, dividends, etc..

Having a great experience in auditing the group accounts in different industries Alt's financial consultancy department has developed a unique consolidation technique which we are ready to share with our clients.

Our assistance to management may vary from consulting on particular issues of consolidation to software customization, staff training and internal control procedures design.

We consolidate your accounts once a pattern, then recommend you optimized information system design and control procedures, train your staff in corporate reporting department and delegate the entire process of consolidation to management.

Re-statement to IFRS, US or UK GAAP
The Ukrainian regulatory body Ministry of Finance is responsible for development, issue and amendment of the National Accounting Standards (NAS).

The Ministry of Finance has been proclaiming that it takes the relevant IFRS (or IAS) as a basis for any particular NAS since the year 1999 (the year when the first NAS were adopted and published). This is quite true as a general statement until you get into details of the NAS. The detailed analysis demonstrates there are discrepancies between NAS and IFRS.

We can argue to what extent they are significant but it really depends on how diversified the business is and what kind of transactions it undertakes. The general trend is quite obvious: the discrepancies become more significant as your business grows and gets involved into financial and investment transactions. Thus, if to compare NAS with the US or UK GAAP the gap gets even bigger.

Ukrainian financial reporting has got another important negative feature: to find it prepared in compliance with NAS will most likely be an exception than the rule. The reason behind this sad fact is explained by the low status of the statutory financial reporting in the eyes of its potential users. The Ukrainian accountants are very good at compiling double entries and supporting transactions with documents but they do not think economically. The other reasons of the Ukrainian statutory reporting being of so low quality are considered in the article Financial reporting as a face of your business on our web-site.

We regard financial reporting as the heart of our practice.

Alt's auditors and financial reporting consultants possess international qualification and unique practical experience in different industries. We closely monitor the latest drafts and amendments of NAS, IFRS, US and UK GAAP and update our comparative statements.

To convert the Ukrainian financial reports to another reporting environment all the items of the financial statements are to be analyzed in detail. Our re-statement procedure is always fully transparent and accompanied with detailed descriptions for every adjustment made. The client's management takes active part in the re-statement process communicating us the accounting and evaluation policies for the financial reporting items as well as other relevant information.

We always pass over to the client not just the final format of re-stated accounts but also our analytical spreadsheets with clear instructions how to continue the procedure internally.

Financial & Business Modeling
Every business has the key value drivers which can be presented and analyzed in a model. If being industry and market focused the models allow you to understand the likely behavior of the business in result of certain events or market changes. Using the financial and business models as a management tool you can either protect your business from unfavorable effects or extend it to the areas identified. The models measure the value of the business assuming different scenarios take place and can be used as an element of strategic planning.

As the businesses are scaled by size, so the models vary from the basic ones to the comprehensive scenario based analysis or simulation exercises.

Alt offers you not just a general financial model but the one that produces expected results. You will be able to analyze the effect of any management decision to the key performance indicators and value of the business. All our models are created in friendly environment and are always open for modification by the management. Some of them may be very complicated including the trend and ratio analysis, risk controls, variance analysis and other decisions oriented instruments.

Our models always work in real life because we educate the users instead of just selling them the final product.

Valuation
There may be different strategies how to maximize the value of the business. But, first of all, it should be fairly measured at some point in time. Due to the absence of one common valuation technique different consultants may come up with significantly different estimates. The final figure is, however, determined by the market when turning the value into the price. When valuing the business the transparency of technique is even more important than the valuation itself.

Corporate value consulting is a key area where our team can demonstrate its industry knowledge and professional experience. We assist our clients in re-structuring programs, major assets acquisitions and disposals, mergers and joint ventures.

Applying our transparent internationally accepted valuation technique we determine the value and possible price of your business (or its segments) on the global markets. Our experts can also recommend you the most efficient restructuring steps to maximize the value of the business in a short-term period of time.

Capital Raising
The Ukrainian capital market can be characterized as extremely undeveloped. The Ukrainian banks are financing the economy at annual interest rate 16% and also prefer not to take a share of business risk of their clients. Being a part of global problem of banking sector, local banks provide only secured loans with a reliable marketable collateral which gets discounted by at least 30%.

As a result, only big businesses with settled operations and identifiable market share have an access to that kind of debt financing. The access to private equity financing is limited by extremely regulated procedures from one side and by the small number of equity investors from another side.

The first very important step to attract external capital is a presentation of information.

Alt's corporate finance team has a positive experience and a wide range of tools how to present your business (or project) to potential investors. Consulting the investors on a daily basis we know how they think and what kind of format they expect to see. All investors are different and preliminary negotiations on a professional level may save you a lot of time and costs in the future.

If your consultant gets involved in the project at this stage it may be a turning point from failure to success. When advising our clients we use an integrated approach. All the aspects of financial reporting and cash flows, tax and legal issues are considered separately and then get integrated into the best solution for the client and potential investor or lender.

Strategic Corporate Advice
If you are new on the Ukrainian market and facing a kind of dilemma whether to invest, participate, buy, sell or produce it looks like a good decision to seek for a professional advice.

Alt's corporate finance team allocates as much time as needed to understand your way of thinking and motives. As long as we all have generated the mutual understanding of the opportunities and risks associated with your strategic decision, a plan to minimize the uncertainty will be offered.

We could be your first (but hopefully not last) reliable partner in Ukraine concentrated on information screening and analysis. That analysis can refer to a particular industry and its main players, markets, your potential business partners, suppliers, buyers and major risks drivers. All our efforts will be concentrated on giving you a strategic advice supported by structured arguments and references to independent information sources.

If you have been making business in Ukraine for some period of time and now are stumped for a major problem it also may be a right time to ask for an independent professional advice. We fully realize that you understand your own business and all its problems deeper than any external advisor. However, for a short period of time we can just look at the problem from another angle, use our experience in different industries and arrange a kind of brain storm.

Our experience suggests that almost all the bottlenecks are caused by the lack of communication at strategic level and information gap between management and shareholders. Quite often we come up with that kind of advice that you have been keeping in mind for a long time and failed to realize it due to the lack of resources or determination. As long as the reason of a problem has been identified how to tackle is really a technical question.

Shareholders Value Management
The top objective of management is to increase the shareholder value of the business. This quite obvious fact may not be the case in the countries with undeveloped corporate governance legislation and week public control. In Ukraine there have been numerous examples when management pursues its own short-term objectives which are far enough from maximizing shareholder value.

If you, as a shareholder, would like to introduce an independent consultant into decision-making process of your business Alt's experts are always at your service.

Our professional opinion can be expressed on a variety of management decisions from strategic, such as to enter new markets or to invest in production of a new product, to operational, such as to employ additional staff or to purchase new equipment. Our business advice will be concentrated on the impact of every such management decision to the different aspects of the business: cash flow, profits, taxation and competitive position on the market. Complex analysis of these factors let us come up with a final conclusion: the positive or negative impact of management decisions on the value of business in a short-term period of time as well as in a long run.

IPO (Initial Public Offering)
IPO (Initial Public Offering) becomes an incredibly popular way of capital raising in the world. The Ukrainian companies also start to realize the benefits of public listing and join the world-wide incremental trend of raising finances through IPO.

Such popularity of IPO is explained by the unique opportunity for current owners of a business to get a fair price for the share of their business offered to the capital market. Another important factor is that current owners may offer for listing less than 50% of total share capital preserving by this way their control over key management decisions within the business. In addition, the current owners are free to choose between domestic and international stock market exchanges where to place the shares to maximize their bid price in the first day of listing.

If to compare the advantages of different financing forms the balance is constantly shifting in the world.

The stock exchanges compete with each other internationally as well as with another forms of financing (private equity, bank loans and venture capital). Some of them, like London's second market Alternative Investment Market (AIM), turned out to be quite successful in the year 2006 at attracting smaller businesses due to relatively low costs and eased regulatory regime. At the same time, the US based NASDAQ and NYSE have been experiencing hard times in attracting international IPOs due to complex new legislation introduced by Sarbanes-Oxley Act that required some time and efforts from both the companies and their advisors to fully digest its provisions. Starting from the year 2006 the rules regarding the costs and regulations became clearer on the US capital markets and now they are comparable with the rest of leading international markets.

The regulatory environment in Europe is also in the process of fundamental change due to the introduction of International Financial Reporting Standards (IFRS) that caused significant revision of IPO's plans for those international companies which were in the middle of their spade-work.

As a general trend, in the long term all the leading international stock exchanges are likely to meet the clients' demands for lower costs and wider global reach.

The major Ukrainian stock exchange (PFTS) was set up in 1996 and since then has been demonstrating continuous growth of its index and volume of trading. However, it remains limited by the little number of shares in issue and investors who take part in day-to-day trading. The communication of PFTS with the world leading exchanges is also not developed enough to guarantee the best share price to the business from IPO listing. As a result, regardless of the significant preparation costs and complicated regulatory framework the strongest Ukrainian businesses prefer to arrange their IPO's on the international capital markets. But this trend again goes in line with the world statistics.

The worldwide number of companies that realized the cross-border transactions in 2006 has increased over 2005 by more than 30%. The most popular stock markets traditionally appeared to be London, the US, Hong Kong and Singapore. In the absence of liquid capital markets at home, London being a part of Europe but with great global opportunities continues to be the main stock exchange for IPO for the former CIS countries including Ukraine.

Through our international network of partners Alt offers you our full support on the long road of IPO. We closely monitor the changes in local legislation and regulatory regimes of the following stock exchanges:

• PFTS (First Securities Trading System) - Ukraine;
• LSE (London Stock Exchange) - UK;
• AIM (Alternative Investment Market) - UK;
• NASDAQ (National Association of Securities Dealers Automated Quotation) - USA;
• NYSE (New York Stock Exchange) - USA;
• RTS (Russian Trading System) - Russia;
• MICEX (Moscow Interbank Currency Exchange) - Russia;
• HKEx (Hong Kong Exchange) - Hong Kong (China).

The question of choosing the right exchange for your international IPO is important since it drives the value of shares. Besides the obvious factor of compliance costs, the exchanges should be compared by complexity of regulatory regimes, time to finalize your IPO and potential investors pool.

For instance, the major international computer software companies prefer the US market since they think it really maximizes their value. At the same time, the businesses from the energy sector soundly consider London as a target for their IPOs.

But for the companies that have just decided to go public the question what the international exchange to choose really takes the last place in their "to do" list. To our estimate, on average, the time period from the moment of strategic decision on behalf of IPO to the first day of listing may take not less than 3 years for companies from the former CIS. This timing estimate just seems to be exaggerated until the full scale of workload is disclosed to the management and shareholders. Basically, we are talking about the biggest internal transformation project the business has ever gone through.

It is one of the common expectation gaps that only accounting and financial departments realize the IPO project. In fact, these two departments just play their roles as communication center within the organization. But their efforts get useless without continuous support and information supply of other functions, the board of directors and the shareholders. IPO should be viewed as an investment project.

In our contacts with clients we like to stress the point that the more they invest in their business transparency, information system and business processes excellency the higher return they can expect from international IPO.

Companies planning their IPO in the international markets need to be aware of IFRS's effect on their activities and reporting. This effect for the UK based companies may be minimum but if we take such countries as Germany and France, the companies in these jurisdictions are likely to experience significant modernization of their financial information systems.

If we consider Ukrainian businesses, their full transition to IFRS may take a couple of years due to the following reasons:

• significant educational gap regarding IFRS of Ukrainian accounting profession, management and shareholders;
• lack of general corporate accounting policy applied by all the companies of the group;
• lack of reliable integrated information system to consolidate financial information from all the controlled subsidiaries;
• significant gaps between IFRS and National Accounting Standards (NAS) which have to be evaluated and reconciled;
• poor system of management financial control including performance measurement under IFRS, budgeting, cash flows and fair value calculations;
• lack of proper communication chain between production, marketing, logistic, legal, tax and financial departments;
• financial staff is not just calculating what the others have done but it must also receive relevant and timely management information from other departments to evaluate leases, provisions, assets impairment, NPVs of the projects in progress, etc.

The above list of potential barriers is given here just as a general guidance and is not exhaustive. By giving some examples of the likely barriers we would like to demonstrate that transition to IFRS is not just a purely accounting technical issue. To get unqualified audit opinion for the financial reporting prepared on the basis of IFRS the business is to initiate and realize the fundamental change of itself internally and externally.

The auditors of the business on its way to IPO look not so at the particular balances and transactions but consider the business processes and information system on its adequacy to produce the final accounts in line with IFRS requirements. The external change presumes much higher level of transparency and new communication standards in relation to the general public and capital markets. In general, the business becomes much more complicated and expensive but its value in the eyes of investors increases accordingly since they get an independent professional assurance that this business reports its financial information under IFRS.

As a common trend, the Ukrainian companies are significantly undervalued. Their real financial position and performance can only be demonstrated by the two successive years after adoption of the IFRS reporting system. Thus, the investment to such a system is very likely to produce a high rate of return as long as the IPO project has been realized.

The next step after the strategic decision to go public has been taken by the owners of the business comes to IPO diagnostic. That is the stage at which Alt can contribute our professional strategic advice. We undertake a comprehensive analysis of the current state of your business to evaluate its maturity for IPO on a specified stock exchange.

Our diagnostic report covers the following IPO related issues:

• current value of your business under IFRS after re-statement of its local financial statements to IFRS; the re-statement process is carried out as a one-time technical accounting exercise based on the best possible information available within the organization;
• comprehensive analysis of the business structure and processes to identify the areas where the value can be maximized including possible disposals, acquisitions, re-organization and tax implications;
• evaluation of the feasibility and effect on the shareholders value after IPO projects which are going to be publicly announced as part of the IPO promotion program; the investors like to know what the cash form IPO is going to be spent on; the proper presentation of such projects and their convincing valuation may be the crucial factor for success of your IPO;
• schedule of your IPO project estimated progress with detailed description of risks and value drivers at each stage including IFRS "to do" list;
• detailed analysis of regulatory regime of the chosen exchange including compliance costs during the first and 3 successive years of the listing;
• estimated costs to finalize IPO project by its key stages as well as the price of shares during their first day of listing.

As a completely new long-term project for any Ukrainian business, IPO almost certainly presumes the participation of external professional advisor, especially at its first organizational stages. The choice of such advisor is, no doubt, a crucial decision for the project's success.

We are always ready to demonstrate you that we know what we are doing. From the first day of our engagement we will start to supply you with a reasonable load of well-structured information relevant to your business situation. As an objective of primal importance, we will create a mutual understanding of the general concept of your IPO project, its key stages, likely costs and benefits. At the beginning of the project we perceive our services more as of educational nature then of practical one. But this stage can not really be ignored. You, as a manager or shareholder, should be armed with a full set of all-round information regarding IPO to take successful tactical decisions on the later stages of the project.

Business Consulting

Business Processes Improvement
Any business can be considered as a set of organizational, technological and controlling processes. It is very important for the management to define each process and function within the organization and review them periodically for further optimization and alternatives consideration. There is, of course, always a trade-off between investments in further improvements and expected benefits in the form of increased efficiency of the business process. As a result, there are no ideal organizations.

Being heavily engaged in day-to-day operations the management may lack so important element of strategic thinking and do not see or undervalue the effect from changes in business processes organization. But any change should be always considered from the standpoint of profit maximization in a long run.

If you choose Alt as your business consultant we will not turn difficult challenges into easy solutions. Instead we will assist you in better understanding of the business introducing a methodology and system-defined approach. Every process your business is undertaking can be measured in time and currency. The basic comparative analysis of how much each function costs you against possible alternatives may completely change your attitude to the organizational structure of your business.

Our experts will also present you an investment program for potential improvements identified and calculate their effect on cash flows and profits in a short-term period as well as in a long run. We will not make your business perfect but we will get you closer to complete understanding of it and confident that you know what you are doing. The figures always tell the truth. The only question is how to calculate them and be able to understand what they are telling you.

Training
Alt organizes training programs for the management of our clients in English, Ukrainian and Russian languages. The term of the programs may vary from one day to a couple of months and the subjects proposed include the following professional topics:

• IFRS, US GAAP, UK GAAP and National Accounting Standards (NAS);
• Consolidation of Financial Statements; 
• Management Accounting (budgeting, cash flows, variance analysis, process costing, activity based costing and other management tools);
• Financial Management (valuation techniques, project analysis and control, financial modeling);
• Tax Accounting Organization;
• Internal Audit and Fraud Identification.

Information System Design
Information system is a heart of your business. If it does not provide the management timely with necessary information to manage the business the risk of business failure increases tremendously. Any business has got some kind of information system. The only question is how it is reliable, effective and controlled.

To determine what kind of information system fits the requirements of your business the management information needs should be identified, as a first step. Our auditors and IT consultants will assist you in choosing the best integrated software solution available on the market and take active part in its design and implementation. Any information system consists of three basic stages: data input, storage and output. The last stage is crucial since the success of the entire project depends upon how timely and in what format information is reported to management to be used in decision-making process.

Our experts will monitor the project at all the stages of its realization and guarantee the complete satisfaction of management requirements.

Planning & Budgeting
The planning is commonly regarded as primal management tool of control. But it only looks like there is no space for innovation and improvement in this area. If we consider planning as a process that consumes time and produces proactive decisions, not so many organizations do eventually achieve this objective.

The planning function is often maintained for the sake of a must procedure only but not as decisions trigger. In reality it is all about the culture of information presentation, reading and acting upon it within the organization. The planning goes beyond mere budget vs. actual analysis. It is always a compromise between to do and to think what you are doing.

Alt's management consultancy team always applies a practical approach to planning and budgeting. We turn it from a waste of time into a value adding process. Except purely planning the performance and analyzing variances the budgeting should be arranged as a team-building process and one of the key motivation tools.

Our consultants are always keen to introduce a culture of planning to your organization since it is much more complicated than just a software, models and figures. It is about how your staff thinks when making up the figures and how you think when reading it. It is also about meaning and respect to information presented as well as actions triggered by it.

The budgeting process may equally be the natural rules of life for your business or boring "to do and forget procedure" producing irrelevant information. It is very much up to you to chose between these two alternatives.

Cost Accounting & Variance Analysis
Cost and management accounting is a core function for any production business. It presumes the costs of production classification by divisions and processes as well as by direct and overhead.

The final objective of costing is to determine the cost of production for each finished product and work in progress. By doing so, the cost accounting provides important valuation for inventories in financial accounting. As long as the cost structure and production processes are designed the next challenge for management comes to the costs control through budgeting and variance analysis.

Alt offers to the clients our knowledge and practical experience in cost and management accounting. We can assist the management with cost accounting department organization and information system design. Having understood the technology of production we can further recommend on the cost structure and control procedures including complex variances calculation and analysis.

Accounting

Outsourced Accounting
Accounting is generally expected to be a process of transactions documentation, input and reporting. The Ukrainian reporting environment presumes three statutory streams - financial, tax (VAT and Corporate tax) and statistical.

The financial reporting is regulated by Ukrainian National Accounting Standards (NASs) which are in general based on their international counterparts - International Financial Reporting Standards (IFRSs). The remaining gaps and differences may become significant only for quite big and diversified businesses and refer to such specific areas of accounting as financial instruments, leasing, provisions, assets impairment, mergers, minority interest, goodwill, etc.

The VAT and Corporate tax (CT) reporting is regulated by separate and quite complicated legislation which deals with transactions or events that have actually taken place. The Ukrainian tax law is quite in line with the philosophy of taxation applied in majority of the European countries but there are, of course, some important particular features.

The set of statistical reports is of purely technical nature and industry oriented. The statutory financial reporting in Ukraine is represented by 5 (five) generally accepted reports:

• Balance Sheet;
• Income Statement;
• Cash Flow Statement;
• Statement of Changes in Capital; 
• Notes to the above financial statements.

Every National Accounting Standard has got a separate clause related to requirements for information disclosure. But at the same time the Notes to financial statements have a statutory format which is quite simplified and just do not allow to satisfy all disclosure requirements. This fact, without any doubt, should be regarded as key weakness of Ukrainian financial reporting environment.

The statutory tax reporting in Ukraine comprises the following returns and reports:
VAT return;
Corporate Tax return;
Other direct taxes reports related to particular industry or business activity.

Alt offers the service of outsourced accounting which is always client oriented. There are three driving factors for accounting function to be successful: proper organization, communication and discipline. Being your accountants, we try to understand the culture of the business, its corporate structure, internal control system and become an integral part of it.

For the potential client it is very important to understand that we are an independent service but not a part of your management team. The management governs your business taking management decisions and we take them through our accounting system to provide you with the results of those decisions. We can consult management but can not take responsibility for their decisions. Please apply for the draft version of our standard Accounting Engagement Letter and it will help you to go through all the controversial issues and risks associated with outsourced accounting function.

• As your accountant, Alt is capable of performing the following challenges:

• customize and maintain a proper accounting software that fits perfectly the type of activity and scale of your business;
• prepare and file the statutory financial reporting in compliance with the NASs;
• prepare and file a set of statistical reports;
• prepare and file VAT and Corporate Tax returns;
• introduce a system of tax planning and foreign currency transactions hedging;
• prepare a reconciliation statement between financial profit before taxation and taxable profit in the CT return;
• calculate deferred tax asset and/or liability;
• restate the statutory final accounts into the format of IFRSs, US or UK GAAP incorporating the effect of necessary adjustments, if any;
• prepare a detailed explanatory note on differences in treatment of particular material balances and transactions by the NASs, IFRSs, US or UK GAAP;
• prepare management and corporate reports in the format and currency that you specify;
• develop a set of periodical (daily, weekly, monthly) reports with key accounting data needed to the management for taking operational decisions.

The majority of our clients for accounting service is represented by just set up large or medium-sized companies with foreign capital. There is no surprise that such companies prefer to postpone the formation of internal accounting department until their businesses have settled down on the Ukrainian market with more or less clear prospects. But as their business is growing to the extent that outsourced accounting function is no longer cost effective, we guarantee the smoothly and controlled transition period. We will certainly do our best to pass over all our records, source documents, accounts balances' details and reporting files.

We assist our clients in finding professional internal accountants, training them and delegating uninterrupted accounting process. The 75% of our clients for accounting service become our audit clients as they grow enough to form an internal accounting department.

Payroll
The payroll is a separate and clearly identifiable element of accounting. The Ukrainian payroll related environment is hugely regulated by the great number of legislative acts and provisions. As any payroll, it consists of 3 (three) parts: gross personal taxable income, taxes payable by employee (deductions) and taxes payable by employer (contributions). The payroll related taxes and their rates are presented in our Payroll Taxes Summary. There is a special reporting form for every payroll related tax which has to be filed to appropriate State controlling institution.

The most complicated issue in Ukrainian payroll is associated with the fact that different types of gross personal income (salary, severance pay, dividends, benefits, etc.) are taxed by the various compositions of taxes and rates. Some of the payroll related taxes are payable monthly by a certain date and some of them are payable at the date of payroll execution (payouts to employees). The Ukrainian payroll is, no doubt, the most vulnerable area of legislation to any kind of continuous amendments.

You can always rely on the professionals of Alt engaged in payroll calculation for our clients. If you chose to delegate us the payroll part of your accounting system, we will ensure the correct calculations, timely payments of taxes and reports filing. The employees of your company should expect that any kind of personal information on their deductions and contributions will be released on demand and in required format within 3 (three) working days.

Restoration of Accounting Process
Accounting always looks backwards. That is why some managers just do not pay the necessary attention to the data supplied by accounting process. Managing the future they can not demonstrate the solid and accurate picture of the past.

If, for any reason, you have accounting records (or database) of your business out-of-date, incomplete or absent at all, you can always rely on our professional expertise and experience to restore it based on the source documents available (some missing documents can also be renewed).

The complete to-date database allows us then to prepare and file all the statutory financial, tax and statistical reporting for missing periods making your business back to life. 

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