Using our expertise, we can research any financial or tax problem you may have.
Examples of technical research and how different interpretations can lead to very different figures:
- Derivatives – these can be accounted for under fair value (mark to market) or historical cost under UK GAAP.
- Share options – the estimate of the fair value of the share options is very subjective and depends on a number of variables
- onerous contracts vs commitments – an onerous contract requires a provision and an expense, which is tax deductible if specific, whereas commitments just need disclosure
- development – this could be interpreted in UK GAAP under FRS 15 or SSAP13 and also guidance from UITF29. Depending on interpretation it could be capitalised as an asset, amortised or depreciated or written off as an expense immediately.
- long term contracts – these could require profits to be recognised over life of contract, or it could be interpreted that the key obligations are not delivered until the end of the contract
Examples of problems solved:
Analysed a $70m option for gold and copper resources and advised client on correct recognition under IFRS.
Reconciled trading a/c statements to client’s books & corrected for approx £1m increase in fair value of call options sold, due to fall in market price of carbon credits.
Analysed 2 opposite CER swap contracts which effectively closed position, but cashflows to be generated over 3 yrs. Client had incorrectly discounted future cashflows.
Analysed FX barrier option & provided for loss committed to at YE on penalty rate as €/£ rate < floor.
Analysed floating to fixed interest rate swap & estimated fair value of swap under IAS 39 as fixed rate < floating rate.
Developed methodology to properly test & document IFRS 2 share options valuations using Black-Scholes model. Assisted clients with model inputs eg volatility, risk free rate, vesting period etc.
Tackled football sponsorship contracts worth €28m & impaired prepayments & recognised provision for excess of unavoidable costs over benefits as problems with laws.
Client had exhausted tax losses. Advised possibility of £25m tax allowable expense if recognise provision of onerous forward CER contracts as mkt price < contracted price.