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Current issues for your agricultural business

Contacts

Egor MetelkinAudit Partner Consumer Industrial Products Leader, Deloitte CIS+7 (495) 787 06 00emetelkin@deloitte.ru

Mykhaylo Melnyk Audit PartnerAgriculture Group Leader, Deloitte CIS+38 (044) 490 90 00mmelnyk@deloitte.ua

Srbuhi HakobyanAudit Partner, Deloitte CIS +7 (495) 787 06 00shakobyan@deloitte.ru

Ludmila GrechanikForensic Partner Consumer Products Group Leader, Deloitte CIS +7 (495) 787 06 00lgrechanik@deloitte.ru

Maria Bubnova Director, Corporate Financial Transactions, Deloitte CIS+ 7 (495) 787 06 00mbubnova@deloitte.ru

Alexei AmmosovConsulting Partner, Consumer Products, Retail & Services Group Leader, Deloitte CIS +7 (495) 787 06 00aammosov@deloitte.ru

Svetlana Fedorova Partner, Tax & Legal, Deloitte CIS +7 (495) 787 06 00sfedorova@deloitte.ru

Natalya Smirnova Director, Consulting, Deloitte CIS +7 (495) 787 06 00nasmirnova@deloitte.ru

• Have you analysed the potential of the agricultural market by region?

• Are you considering the development of an agricultural cluster and/or a strategy for entry to new markets?

• How can finance be raised if markets are closed?

• What should you know about the business you acquired in the agricultural sector?

• How can maximum tax efficiency be achieved in financing?

• What federal and regional subsidies are available for companies in the agricultural sector for the payment of interest on loans, and what is the procedure for claiming these subsidies?

• What are the necessary actions to prepare a business in the agricultural sector for sale and search for an investor?

• What risks for a potential investor are inherent in the business and how can these risks be mitigated?

• How can a transaction with a potential investor be structured correctly?

• How can the tax liabilities of the company be restructured?

• Have you analysed your foreign assets for the possibility of additional tax liabilities arising following the adoption of measures for the deoffshorisation of the Russian economy?

• How can transparency of the company’s operations be ensured?

• How can the receipt of accurate information be ensured in the shortest timeframes?

• How can costs be reduced by decreasing duplicated functions and by harmonising operations?

• How can the distribution of authority and responsibility be ensured?

• What is the legal basis for the ownership of agricultural land plots?

• Has there been an analysis of the legal basis for the ownership of the land?

• How can branches and representative offices of agricultural companies operating in Crimea avoid double taxation? What legislation should be applied in the transition period?

• Has an analysis of legal risks been performed, relating to water and electricity supply for use on agricultural land plots?

• How can federal tax incentives be claimed (rate of 0% income tax and property tax as well as a reduction in insurance contributions) and how can risks associated with their application be reduced?

• How can regional subsidies and additional incentives, widely provided in a large number of Russian regions for agricultural sector companies, be claimed?

• How can the structure of the company’s operations be optimised to reduce the impact of VAT on the business?

• Has a pricing methodology between interdependent companies been formed which takes into account active transfer pricing rules?

• How can cash accumulated in the accounts of manufacturing companies (using tax incentives) be transferred to a central holding company in a tax efficient way?

• Have you developed a target operational model?

• Have you chosen a manufacturing site and a company that will provide you with assistance when conducting negotiations?

• Do you follow a business planning process in your company?

• Do your investors require the preparation of agricultural business IFRS consolidated financial statements?

• Has the restructuring of your group been completed to determine the consolidation perimeter in accordance with IFRS (organisation of holding structure and inclusion of required companies within the group by control, with specific reference to the agricultural business)?

• Has a date for transition to IFRS been chosen with an analysis of the most favorable time for the group (for example, taking into account requirements for the valuation of biological assets and for audit)?

• Do group companies have the skills necessary for independent preparation of IFRS statements?

• Has a plan for the implementation of an accounting function been selected to minimise costs and to increase output when establishing the IFRS accounting process?

• How far do the accounting data presented for business management correspond with the tasks facing you and best practice existing among businesses in your industry? Is there a clear link between the data for business management and data presented for investors (IFRS data)?

• Is the current plan for the implementation of the financial function (planning, management accounting, national accounting, IFRS accounting) the most efficient? Have accounting principles been harmonised? Is information presented accurately, correctly and in the required timeframes? Are the functions of contractors duplicated? Is it possible to reduce resources and optimise costs when reviewing current processes as a part of operations?

• Did you use fair value when valuing winter crops as biological assets in accordance with IAS 41 Agriculture?

• Did you recognise the movement of accounts of biological assets from the beginning to the end of the reporting period in accordance with IAS 41 Agriculture?

1. Financing of the business:

2. Financial, tax and legal due diligence:

3. Increase in the efficiency and manageability of a business:

4. Preparation of financial statements:

Capital construction:

• Do you know the real cost of the construction of premises?

• Do you perform independent inspections of the premises under construction?

• How often do you review your contractors?

• Are you aware of the real reasons why construction projects are allocated excessive budgets?

• Do you analyse the price of materials?

Forensic:

• Do you analyse what borrowed funds are actually used for?

• Do you review counterparties for potential conflicts of interest?

• How often does your company perform independent audits/unplanned stocktakes?

• Do you perform a regular/independent audit on the relationship between prices paid for services and the scope of the services actually received?

• How do you control the creation of a fund for payroll/bonuses for employees/cost of work force/ cash compensation?

• Do you conduct an analysis of the efficiency of lease operations?

1. Financing of the business

3. Increase in the effi-ciency and manage-ability of a business

4. Preparation

of financial

statements

2. Financial, tax and legal

due diligence