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Business valuations
We offer expert valuation advice in transactions, regulatory and administrative matters, and matters subject to dispute – valuing businesses, shares and intangible assets in a wide range of industries.
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Capital markets
You need corporate finance specialists experienced in international capital markets on your side if you’re buying or selling financial securities.
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Complex and international services
Our experience of multi-jurisdictional insolvencies coupled with our international reputation allows us to deliver the best possible outcome for all stakeholders.
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Corporate insolvency
Our corporate investigation and recovery teams can help you manage insolvency situations and facilitate the best outcome.
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Debt advisory
An optimal funding structure for your organisation presents unprecedented opportunities, but achieving this can be difficult without a trusted advisor.
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Expert witness
Our expert witnesses analyse, interpret, summarise and present complex financial and business-related issues which are understandable and properly supported.
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Financial models
A sound financial model will help you understand the impact of your decisions before you make them. Talk to us about our user-friendly models.
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Forensic and investigation services
We provide investigative accounting and litigation support services for commercial, matrimonial, criminal, business valuation and insurance disputes.
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Independent business review
Is your business viable? Will it remain viable in the future? A thorough independent business review can help your organisation answer these fundamental questions.
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IT forensics
Effective ESI analysis is integral to the success of your business. Our IT forensics experts have the technical expertise to identify, preserve and interrogate electronic data.
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Mergers and acquisitions
Grant Thornton provides strategic and execution support for mergers, acquisitions, sales and fundraising.
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Raising finance
Raising finance - funders value partners who can deliver a robust financial model, a sound business strategy and rigorous planning. We can guide you through the challenges that these transactions can pose and help you build a foundation for long term success once the deal is done.
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Relationship property services
Grant Thornton offers high quality independent advice on the many financial issues associated with relationship property from considering an individual financial issue to all aspects of a complex settlement.
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Restructuring and turnaround
Grant Thornton’s restructuring and turnaround service capabilities include cash flow, liquidity management and forecasting; crisis and interim management; financial advisory services to companies and parties in transition and distress
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Transaction advisory
Our depth of market knowledge will steer you through the transaction process. Grant Thornton’s dynamic teams offer range of financial, commercial and operational expertise.
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Virtual asset advisory
Helping you navigate the world of virtual currencies and decentralised financial systems.
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Corporate tax
Grant Thornton can identify tax issues, risks and opportunities in your organisation and implement strategies to improve your bottom line.
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Employment tax
Grant Thornton’s advisers can help you with PAYE (payroll tax), Kiwisaver, fringe benefits tax (FBT), student loans, global mobility services, international tax
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Global mobility services
Our team can help expatriates and their employers deal with tax and employment matters both in New Zealand and overseas. With the correct planning advice, employee allowances and benefits may be structured to avoid double taxation and achieve tax savings.
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GST
GST has the potential to become a minefield and can be expensive when it goes wrong. Our technical knowledge can help you minimise the negative impact of GST
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International tax
International tax rules are undergoing their biggest change in a generation. Tax authorities around the world are increasingly vigilant, especially when it comes to global operations.
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Research and Development
R&D tax incentives are often underused and misunderstood – is your business maximising opportunities for making claims?
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Tax compliance
Our advisers help clients manage the critical issue of compliance across accountancy regulations, corporation law and tax. We also offer business and wealth advisory services, which means we can provide a seamless and tax-effective offering to our clients.
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Tax governance
Mitigate tax risks and implement best practice governance that will stand up to IRD scrutiny and audits.
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Transfer pricing
Tax authorities are demanding transparency in international arrangements. We businesses comply with regulations and use transfer pricing as a strategic planning tool.
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Audit methodology
Our five step audit methodology offers a high quality service wherever you are in the world and includes planning, risk assessment, testing internal controls, substantive testing, and concluding and reporting
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Audit technology
We apply our audit methodology with an integrated set of software tools known as the Voyager suite. Our technology has been developed to produce quality audits that are effective and efficient.
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Financial reporting advisory
Our financial reporting advisers have the expertise to help you deal with the constantly evolving regulatory environment.
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Business architecture
Our business architects help businesses with disruptive conditions, business expansion and competitive challenges; the deployment of your strategy is critical to success.
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Cloud services
Leverage the cloud to keep your data safe, operate more efficiently, reduce costs and create a better experience for your employees and clients.
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Internal audit
Our internal audits deliver independent assurance over key controls within your riskiest processes, proving what works and what doesn’t and recommending improvements.
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IT advisory
Our hands on product experience, extensive functional knowledge and industry insights help clients solve complex IT and technology issues
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IT privacy and security
IT privacy and security should support your business strategy. Our pragmatic approach focuses on reducing cyber security risks specific to your organisation
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Payroll assurance
Our specialist payroll assurance team can conduct a review of your payroll system configuration and processes, and then help you and your team to implement any necessary recalculations.
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PCI DSS
Our information security specialists are approved Qualified Security Assessors (QSAs) that have been qualified by the PCI Security Standards Council to independently assess merchants and service providers.
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Process improvement
As your organisation grows in size and complexity, processes that were once enabling often become cumbersome and inefficient. To maintain growth, your business must remain flexible, agile and profitable
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Procurement/supply chain
Procurement and supply chain inputs will often dominate your balance sheet and constantly evolve for organisations to remain competitive and meet changing customer requirements
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Project assurance
Major programmes and projects expose you to significant financial and reputational risk throughout their life cycle. Don’t let these risks become a reality.
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Risk management
We understand that growing companies need to establish robust internal controls, and use information technology to effectively mitigate risk.
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Robotic process automation (RPA)
RPA is emerging as the most sophisticated form of automation used to help businesses become more agile and remain competitive in the face of today’s ongoing digital disruption.
The current economic environment and its impact on your financial statements
Fluctuating interest rates, ongoing contraction in GDP, and climate-related uncertainties will impact your financial statements (and there’s a separate set of mandatory climate standards for regulated institutions). This market volatility has affected business confidence, property prices, and increased our awareness of climate risks.
All of these factors point to the importance of considering various entity or industry specific scenarios - for example, a manufacturing entity with significant greenhouse gas emissions or a service provider with substantial goodwill. These circumstances illustrate the diverse challenges businesses face in demonstrating the current economic and environmental uncertainty in financial statements.
Indicators of impairment
Impairment indicators include a decline in asset fair value, changing market interest rates, adverse changes in the economic environment, and evidence of asset obsolescence or damage. These uncertainties highlight the need for businesses to be vigilant as these indicators may require impairment tests for assets previously not considered at risk.
Present value calculations
There are implications of falling interest rates for present value calculations. Lower discount rates can lead to higher fair values of assets, providing more flexibility in impairment calculations. However, changes in key assumptions, such as revenue growth and capital expenditures, can significantly impact these calculations. This highlights the need for careful attention to impairment, particularly in the current environment.
Climate-related risks
In response to growing concerns about sustainability, the International Accounting Standards Board (IASB) produced an exposure draft about climate-related and other uncertainties in financial statements. It outlines various climate-related risks, including physical risks (e.g., weather events), regulatory risks (e.g., emission allowances), and transition risks (e.g., investments in energy-efficient technology). To provide a comprehensive view of potential risks, it’s really important to the integrate climate-related disclosures into your financial statements.
Disclosures and judgements
Additional disclosures are required when existing standards don’t sufficiently communicate the impact of transactions and events on your organisation’s financial performance. Consider materiality judgements and the information users of your financial statements would find helpful.
In summary, the key message is that it's particularly important to periodically review material estimate and judgment disclosures in financial statements in light of current economic and environmental uncertainty.
Lease accounting
On 1 January 2019, the New Zealand international financial reporting standard on leases (NZ IFRS16) came into effect.
Five years and a pandemic later, here’s what we’ve learned from a lessees perspective.
What is a lease?
Under IFRS 16 a lease is defined as, “A contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration.”
Over the last five years we’ve found it’s important to have processes in place to assess new contracts to determine whether they are, or contain, a lease.
An agreement may not specifically be called a lease to be considered a lease under this standard. For example, service-type arrangements such as transport, warehousing, and technology may contain a lease.
Do I have to account for all leases?
- Short term leases: A short-term lease is defined as a lease that, at the commencement date, has a lease term of 12 months or less, and does not contain a purchase option. For example, short term accommodation for workers or hiring equipment on an ad hoc basis. However, a rolling annual or monthly lease on your premises is not short term.
- Low value leases: This exception applies to cellphones, tablets and personal computers as well as small items of office furniture and telephones; it relates to the value of the underlying asset when new. A car does not qualify as low value because a new car would typically not be of low value.
- When IFRS 16 first came in effect, $5,000USD was used as a rule of thumb for low value assets. This is not mentioned in the standard but was used as a guide. Five years on we have experienced inflation so there may be low value assets that are worth more than $5,000USD. Instead, you should apply the logic that office equipment like a cellphone is low value, but cars are not.
Has something changed?
Change in payments
This is probably the most common reassessment of your lease calculation with market rent reviews and adjustments relating to an index or rate being common practice. It is important to remember that these changes need to be factored into the lease calculation on a prospective basis.
The notable exception to this was where rent concessions were received during the pandemic; these didn’t need to be factored into your IFRS 16 calculations. However, this only applied to rent concessions on lease payments due on or before 30 June 2022.
Change in lease term
A change in lease term has been a common scenario over the last few years with weather events seeing motor vehicles being written off, businesses relocating, and square footage requirements changing.
Navigating artificial intelligence, automation and flexible working policies are becoming common as well.
This leads into a frequently asked question: When do I change the discount rate?
A new discount rate only needs to be applied to an existing lease calculation when there has been a change in:
- lease terms
- the assessment of the option to purchase
- a change in lease payments resulting from a change in floating interest rates.
There is also a concession in the standard for discount rates where you can apply the same rate to leases with similar characteristics called the “portfolio application”. However, you can only use this concession if the calculation would not differ materially if the concession wasn’t applied.
If there has been a change in term, a change in the option to purchase, a change in lease payments resulting from a change in floating interest rates or you are using the portfolio rate, it is likely that you need to increase the discount rate, when you consider that the official cash rate was 1.75% on 1 January 2019 and is now 4.75%
Has your lease terminated?
For example, if your property lease is about to expire and you re-negotiate to stay on in the property, this is a modification that wouldn’t be accounted for as a separate lease, unless you have increased the scope of what you are leasing; for example you might take on more carparks. Instead, you would re-measure. So, over the course of your business lifecycle your property leases will mostly only terminate if you move.
How to account for lease incentives
A lease incentive is when the lessor makes a payment to the leasee or reduces the lease cost.
Common forms are cash incentives and contributions to fit out at the commencement of the lease. In your lease calculations, these types of incentives reduce the right of use asset but do not affect the lease liability.
Another common scenario is a rent-free period at the commencement, that affects both your right of use asset and lease liability.
It should be noted incentives can take many forms, adding various levels of complexity to your lease calculations.
What about a sublease?
Subleasing means you need to apply the Lessor part of IFRS 16 and determine if the sublease is considered an operating or financing lease.
US GAAP v. NZ IFRS
When it comes to lease accounting under US GAAP, you can set and forget your calculations under more circumstances than you can for IFRS 16.
For example, a lease with payments adjusted annually for changes in the consumer price index are remeasured each year under IFRS 16. However, these are not re-measured under US GAAP.
The moral of the story
You can’t set and forget your lease calculations. You need processes in place to identify, assess and account for changes in exiting leases as well as new leases.
Upcoming changes to the reporting landscape
There are several significant changes to International Financial Reporting Standards (IFRS) that will impact reporting entities currently and in coming years.
For financial reporting periods beginning on or after January 1, 2023, there were amendments to the disclosure of accounting policies, the definition of accounting estimates, and deferred tax related to assets and liabilities. These changes, affecting all Tier 1 and Tier 2 entities, aim to enhance the clarity and consistency of financial reporting. A key amendment included the replacement of ‘significant’ accounting policies with ‘material’ accounting policies, reflecting the greater guidance provided by IFRS to assist our understanding of the concept of ‘material’ accounting policies.
For financial reporting periods beginning on or after January 1, 2024 (i.e. 31 December 2024 and subsequent balance dates) further amendments to NZ IAS 1 came into effect, focusing on the classification of liabilities as current or non-current and the treatment of non-current liabilities with covenants. These amendments are designed to improve the information provided in financial statements about long-term debt where covenants have been breached, which could have significant implications for key financial ratios.
Looking ahead to January 1, 2027, new standards such as NZ IFRS 18 and NZ IFRS 19 will be introduced. NZ IFRS 18, titled, “Presentation and Disclosure in Financial Statements,” will bring substantial changes to how financial performance is reported. This standard introduces new categories and subtotals in the statement of profit or loss, including operating profit and profit before financing and income taxes. Additionally, it requires the disclosure of management-defined performance measures (MPMs) and specified expenses by nature. The aim is to provide more relevant and faithfully representative information about an entity’s financial performance, enhancing comparability and transparency.
NZ IFRS 19, which convers subsidiaries without public accountability, will not be adopted in New Zealand. Instead, the existing Reduced Disclosure Regime (RDR) will be retained.
Upcoming changes from IASB include exposure drafts for IAS 28, which proposes amendments to address application questions about the equity method of accounting, and for climate-related and other uncertainties. Additionally, there is a review and potential improvements to the Statement of Cash Flows under IAS 7.
We recommend Tier 1 reporters disclose the impact of NZ IFRS 18 or state the entity has not yet applied it. It is crucial to begin planning for the transition to these new standards, considering the potential impact on loan covenants and remuneration contracts.