STANDARDS CASE STUDIES
ACCOUNTING AND OTHER LEGISLATION
Interpretation of social contribution legislation: Legal use
A broadcasting corporation is subject to an additional employer’s contribution on revenue directly related to media and entertainment activities, as per the law. Our client sought a thorough evaluation and interpretation of existing legislation to accurately determine the basis for estimating an employer’s contribution for presentation to the competent court. We conducted an analysis of the various types of operating revenue of broadcasting corporations and relevant legislation to ascertain the correct basis for estimating the amount of employers’ contributions.
Accounting and tax treatment, management use
Our client, a financial institution had sold a number of pieces of industrial land under the term that the sale shall be revoked, if the buyer was unable to use it for the agreed purpose within a specified period of time. We embarked on a thorough examination of the terms of the sale contracts and related accounting standards and legislation, with a view to recommending the appropriate treatment of the transaction (reversal of sale), from both the accounting and tax perspective. Based on our analysis of relevant provisions and the terms of the initial contract(s), we recommended a solution fully compatible with applicable accounting framework (IFRSs) which also ensured the recognition of tax losses carried forward.
Accounting and tax treatment, management use
Our client had planned to refinance its long-term funding from European financial institutions. The early repayment of the initial loans entailed the prepayment indemnity of a significant amount. We embarked on a thorough examination of the terms of the refinancing agreement and the related provisions of applicable accounting standards (IFRSs), to recommend the appropriate accounting treatment. We also examined the tax implications of the transaction and recommended appropriate treatment.
Recognition of brand – Correction of error
Our client, a prominent sports club, operates under the legal form of a limited liability company. By law, it has the right to use, for a given period, the emblem (brand) of the society sports club. In return for the use of its asset (the emblem), the society sports club holds shares in the sports club company and enjoys other privileges. Yet, the value of the brand had not been recognized by the sports club company since its inception. Following an examination of applicable (often confusing, contradicting and incomplete) legislation and related accounting standards, we concluded that under the true and fair override criterion in preparing corporate financial statement, the sports club company should recognize the value to the brand in its financial statements as a retrospective correction of error. Τhe value of the brand as determined using an appropriate, in the circumstances, method.
Interpretation of accounting standards and corporate restructuring for management use
Our client had applied for a restructuring and rescue financial plan, which had been approved by the competent court. In the context of the restructuring plan, a series of complex transactions took place. At the request of the management of our client, and following a thorough examination of the details of the afore mentioned transactions and the relevant provisions of the applicable financial reporting framework (IFRSs), we prepared a report as to the appropriate accounting treatment on our client’s consolidated financial statements.
Interpretation of accounting standards in a corporate restructuring
A leading services company, after years of financial and liquidity challenges, reached a creditor agreement under Greek bankruptcy law. Following corporate restructuring, a new majority shareholder emerged. Subsequently, the former majority shareholder initiated a legal dispute aiming to overturn annual shareholder meeting decisions approving the financial statements. Our client (the new majority shareholder) sought our advice on various aspects of preparing separate and consolidated financial statements under Greek law (4308/2014) and IFRSs, and the implications of a disclaimer of opinion by the company’s auditor.
Interpretation of accounting standards in a corporate restructuring
Amid a legal dispute, our client requested guidance on preparing separate and consolidated financial statements under IFRSs. Key inquiries focused on the true and fair presentation of financial statements under exceptional circumstances, including the impact of unapproved financial statements by management of certain subsidiaries, the role of the group auditor, the appropriate financial statements for restructuring negotiations with creditors, and the accounting for loss of control over a subsidiary.
Interpretation of accounting standards in a complex transaction, for management use
Our client has invested in two entities over which it initially exercised significant influence but not control (investment in associates). At a later time, it increased its participation in one of the two investees to a percent that gives control (over 50%). However, under law, the exercise of control is suspended until the ratification of the purchase by the Greek Competition Committee. Our client raised questions regarding the relationship, under IAS 24, between the two investees as well as vis a vis the investor, in the special circumstances given. Following a thorough examination of related provisions and the details of the transaction, we prepared a convincing report with recommended action, in conformity with legislation.
Interpretation of company law: Determining distributable profits for management use
Our client, a specialized company investing in property, presented us with a query regarding the amount of distributable profits. This issue stems from a clear conflict or misalignment between a general prohibition against distributing unrealized profits and the requirement for special property companies to distribute a certain percentage of their annual profits. The problem is compounded by the law’s failure to address several practical aspects of this issue, rendering the relevant provisions problematic or inapplicable. We thoroughly examined the pertinent legislative provisions, assessed their applicability in real-life business scenarios, and considered the overarching European business law directives. Our goal was to devise a straightforward and defensible solution to the problem.
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