Construction industry in Russia is traditionally sensitive to any changes in macro economy. This holds especially true for changes in capital markets. In addition, the industry is also sensitive to draft laws being considered by state bodies. The above entails additional uncertainty as to the vector of its development, as well as development of the market players. As a result the companies encounter certain decrease in financial results of their performance and have to adapt to current conditions by revising their business strategy.
Our specialists continuously monitor state of the construction industry and its development. Combined with accumulated experience such monitoring enables us to assist companies active in the industry in coming up with solutions that upgrade their performance indicators. To this end, we have been successfully providing to our clients for over 20 years services related to audit, statutory and IFRS reporting, real estate and construction-in-progress appraisal, as well as consulting on corporate finance and management accounts issues.
Developing marketing models with account of tax benefits and risks
Within the framework of preparing controlled transaction documents for a large international company manufacturing construction materials, possible scenarios were developed upon our recommendation for restructuring the product marketing model with account of current tax benefits and associated tax risks.
Upon consideration of proposed scenarios the client chose and implemented a solution optimal for its business and corresponding to its strategy and development goals.
Due Diligence of real estate property and land plots
Our lawyers performed successful due diligence of five land plots and real estate property objects in various regions of Russia within the framework of their acquisition by the largest construction machinery distributor. In the process of due diligence Baker Tilly Russia lawyers performed a detailed expert review of the company's foundation documents and documents of title, including all documents of title for land plots and real estate property.
Subsequently, our legal team assisted the company with registration of the new owner's ownership rights with territorial registration bodies by making relevant entries in the Unified State Register of Legal Entities.
Assessment of tax accounting status and identification of tax risks
Management of a construction company involved in non-residential construction requested assistance of Baker Tilly Russia specialists with the assessment of its tax accounting status and identification of possible risks of additional accrual of taxes by tax bodies.
Having analyzed the data provided, our specialists identified flaws in the company's tax accounting system, possible tax risks and suggested relevant mitigation methods. Our specialists also recommended changes in the company's business processes that would enable the company to optimize its tax burden and bring down amount of expenses that are non-deductable for profit tax purposes. Prompt implementation by the company of the proposed changes allowed the company to avoid accrual of additional taxes and fines, as well as to cut down its future tax burden.
Appraisal and reappraisal of real estate property in accordance with IFRS and RAS
For over 10 years our company has collaborated with a Top 50 Russian bank doing appraisal and reappraisals in accordance with IFRS and RAS of more than 200 real estate assets located in more than 20 regions and 60 cities of Russia annually.
Results of our fair (market) price and market rent calculations were used as basis for management decisions - for sale as well as lease purposes, as well as for preparation of corporate IFRS financial statements, including IFRS13. Our appraisal results were confirmed by Big4 audit companies.
Optimization of the process on preparation of IFRS financial statements in the construction sector
A group of companies - a large developer with ongoing residential construction projects in several regions of Russia - engaged us to audit its IFRS financial statements. As a result of the audit performed the group management was provided with an audit opinion identifying flaws in the group's accounting and internal control systems.
Solutions proposed by Baker Tilly Russia specialists allowed optimizing the process of IFRS statements preparation and upgrading employee qualification. After the group had implemented the recommended solutions, the process of preparation of IFRS financial statements took less time and was performed with minimum number of mistakes.
Price audit services for a new chemical plant construction project
The Client wanted a price audit performed in order to confirm correctness of cost estimates for construction and purchase of Russian and imported equipment. Our specialists performed a comprehensive analysis including review of estimates and comparison of budgeted costs with market prices. As a result of the analysis performed, certain instances were identified of 8-20% variance between budgeted costs and market prices.
Best use analysis for a building of 11,672.4 sq.m. total area
A real estate developer engaged our team to perform best use analysis for a former hotel building of 11,672.4 sq.m. total area located on a 0.67 ha land plot in Nizhny Novgorod. Baker Tilly Russia analyzed two intended use scenarios: office building and hotel.
Analysis results: remodeling the building as a hotel was the best use scenario. Current status of the project: financing allocated, the building is being remodeled as a 4 Star hotel under an international hotel brand plus elite club-type residential condominiums.
Damaged equipment appraisal for an insurance company
Baker Tilly Russia experts were engaged by an insurance company to identify and evaluate equipment damaged as a result of an explosion at a natural gas liquids plant. The insurant declared RUR 600 mln compensation amount.
- technical documents analysis;
- appraisal of damage level and damaged equipment condition;
- cost calculations for recovery work and expenses.
Specific traits of this particular case were:
- difficulties with identifying damaged equipment;
- need to engage construction appraisal experts;
- numerous meetings with insurant representatives;
- lack of competitor suppliers of equipment and construction services due to the specialized nature of the plant;
- deletion of certain equipment from the declared list of damaged equipment due to the fact that only protective covers or replacement parts were damaged on such equipment;
- deletion from the insurant's cost estimate of expenses related to cable upgrading and relaying of transfer devices under new design plan that envisaged prolongation of the raceway by more than 10 km.
As a result of the services provided, the client received a confirmed report on the list of damaged equipment and calculation of the amount of insurance compensation required to cover emergency response and restoration works at the damaged facility (the declared amount was brought down by approximately 10 %).
Risk comes from not knowing what you’re doing.
Remember There’s No Such Thing As An Unrealistic Goal – Just Unrealistic Time Frames.
If you keep your eye on the profit, you’re going to skimp on the product. But if you focus on making really great products, then the profits will follow.