In order to manage, first measure. An accurate valuation of your business is critical to successful management.

In order to manage, first measure. An accurate valuation of your business is critical to successful management.

Real estate is often the most valuable asset on the balance sheet. When was the last time you had it reliably valued?

Real estate is often the most valuable asset on the balance sheet. When was the last time you had it reliably valued?

Often overlooked but always critical. Typically machinery & equipment is only considered for managing depreciation.

Often overlooked but always critical. Typically machinery & equipment is only considered for managing depreciation.

World Best Practice in Real Estate Due Diligence


If we observe America about 125 years ago when the gold rush was at its height and people would register their claims at a title registration office. This process saw the beginning of Title Insurance - claimants who registered were given a guarantee that they’d have a legal right to own and develop. Nowadays, in America no real estate transaction happens without Title Insurance.

With that in mind, Paul Boldy of Boldy Associates, began to introduce title insurance into Asia 4 years ago beginning in Hong Kong and Korea. Paul works with 2 of the world’s leading title insurance firms, Land American and Stewart title. Paul discovered that Title Insurance helps speed up the transaction for any buyer in any market but is especially useful in Asia with the main markets being China, India, Korea and Thailand.

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Environmental Risk and Due Diligence in Asia


Over the recent years we have seen increasing trends towards understanding and managing potential environmental liabilities and risks associated with investments. These trends have developed alongside the implementation of new and existing requirements on property transactions and operational performance. In addition there is an increasing trend of financial institutions requiring environmental risks to be considered prior to approving financing. Documenting the environmental risk status at the time of transfer is now seen as standard practice by many investors throughout the region.

An environmental risk assessment conducted prior to completion can be beneficial to both parties. Not only does it identify the compliance status, but also indicates areas of potential concern such as contaminated land and asbestos. By identifying these issues at the onset reduces potential futures costs in litigation and remediation, improves budgeting, and allows for opportunities in risk and cost reduction and liability management.

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Actuarial Valuation under IFRS19

Defined benefit plans are classified as post-employment plans where the obligation of the entity is to provide the agreed benefits to current and former employees, usually based on some benefit formulas. Under benefit plans actuarial risk and investment risk fall, in substance, on the entity. If actuarial and investment experience is worse than expected, the entity’s obligation may be increased.

Accounting for defined benefit plans is complex because actuarial assumptions are required to measure the liability and the expense and there is a possibility of actuarial gains and losses. Moreover, the benefit obligations are measured on a discounted basis because they may be settled many years after the employees render the related service.

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IFRS3 - Business Combinations - Part 1


Several countries have adopted the IFRS 3 and some of the effective dates are as follow:

Country   Standard   Effective date
International   IFRS 3   31st March 2004
Australia   AASB 3   1st January 2005
Hong Kong   HK FRS 3   1st January 2005
Malaysia   FRS 3   1st January 2006
New Zealand   NZ FRS 3   1st January 2007 1
Singapore   FRS 103   1st July 2004
US GAAP   FAS 141   1st July 2001 2


1 Early adoption is permitted only if entity complies with NZ FRS 1 on 1 January 2005.
2 FAS141 predates the introduction of IFRS 3, but contains many similar provisions. However, there are key differences in certain areas.

Financial reporting rules for acquisitions were radically changed by the introduction of the IFRS 3. The new standard requires that the Purchase Method to be applied for all acquisitions.

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IPO Due Diligence

IPO Due Diligence

Intellectual Capital Due Diligence This covers four key areas of the business; the business recipe, the internal structural capital, human capital and external structural capital. The following chart shows these and the topics underlying each area:

 

As well as determining the current status of the business in terms of these four areas, we also look at what measures the business is taking to improve its position and what risks it faces in these areas. The intellectual capital assessment is forward-looking, as opposed to financial reports which deal with historical fact, and is therefore a much better predictor of future performance.

In performing intellectual capital due diligence, senior management, middle management, customers, suppliers, industry experts and other stakeholders such as bankers, legal advisors, insurance brokers and industry experts are interviewed in a structured manner. The results of the interviews, both qualitative and quantitative responses, are carefully collated and cross-checked for consistency and then analysed and compared against industry benchmarks. The final results can provide useful insights for both the company and its sponsor and are often used beyond the IPO issue itself, frequently being worked into future business models. Technical Due Diligence This aspect of due diligence doesn't apply to all IPO's. This is most relevant to manufacturing companies, infrastructure companies or high-technology companies where future earnings are largely dependent upon physical assets of some sort. For manufacturing companies, future earnings are directly related to production capacity, quality of outputs and ability to withstand (or respond to) future technological changes. The technical due diligence report deals with these issues. Typically an industry expert would review the existing manufacturing facilities and future capital expenditure budgets against stated operating parameters and expected production volumes. The key result is a manufacturing capacity analysis. Other possible areas of investigation include susceptibility to energy cost increases, reliance on raw materials, operating efficiency and/or technological feasibility. In the case of infrastructure companies, they are usually contractually obliged to meet certain availability criteria. Failure to meet stipulated availability criteria will not only reduce revenue it will usually result in financial penalties. The capacity and condition of physical assets, operations management and maintenance procedures are critical meeting these obligations. Censere provides comprehensive intellectual capital and technical due diligence services throughout Asia Pacific. We have in-house technical expertise in many industry sectors and have affiliations with other experts in most other industry sectors. For more information on either of these services, please contact your nearest office.