Professional Documents
Culture Documents
Table of Contents
I.
My story............................................................................................................... 3
II.
2.
Philosophy......................................................................................................... 6
3.
Partners......................................................................................................... 8
TPA Horwath Services....................................................................................... 9
4.
a.
Tax Advisory................................................................................................. 10
b.
Accounting................................................................................................... 10
c.
Audit............................................................................................................ 11
d.
Advisory....................................................................................................... 12
5.
Industries........................................................................................................ 17
III.
1.
2.
3.
Project work.................................................................................................... 31
IV.
Emerging Markets........................................................................................... 31
1.
Marketing Approach..................................................................................... 34
b.
Brand Significance....................................................................................... 34
c.
Competition................................................................................................. 34
d.
Opportunities............................................................................................... 35
2.
V.
International Investments.................................................................................. 38
VI.
International Finance....................................................................................... 40
VII.
International Taxation..................................................................................... 42
1.
VIII.
International Marketing...................................................................................47
1.
IX.
X.
Sources.............................................................................................................. 58
2
XI.
Appendix......................................................................................................... 58
I.
My story
As a current master student of the Faculty of Business in University Babes-Bolyai Cluj Napoca I
had the luck and the opportunity to encounter many interesting subjects, which have not only
developed and changed my thinking but opened up new horizons of which I have never thought
before. Having my bachelor degree in legal studies the one subject mostly interesting for me
happened to be International Taxation, since it offers a great chance to use my legal skills but
also requires quite a lot of business thinking.
After finishing the course I knew that this is the field in which I want to work and I will put all
my energy in finding my way in this career. Maybe it was luck or fate but in the summer of 2014
3
I was chosen to participate in an International Tax Law Summer School organized by the legal
cathedra of Wirtshaftsuniweristat Vienna. It was not only a great source of knowledge, but also
inspiration and networking.
This Summer School was mainly sponsored by the 8 th biggest consultancy company in the world,
or better said one if its brands TPA Horwath Austria. Taking advantage of the proximity of the
situation with the officials of the company I reminded myself of one of the ost important things
we are though at TBS, networking. So I gathered all my courage and approached the head of the
Austrian HR of TPA Horwath, Mrs. Katharina Gruber, asked for her business card and
suggesting her to offer me internship from the beginning of 2015.
Why Poland?
By the time I attended the Summer school I already knew that Im going to follow my Erasmus
study exchange in Warsaw, Poland. Knowing this I had the courage to propose Mrs. Gruber the
idea of offering me an internship in their Warsaw office at their tax department. Mrs. Gruber was
very glad and satisfied to see me so motivated to work for TPA and she kindly offered to make
efforts to make my dream come true.
She only asked me to keep contact through e-mail and she was updating me on the situation
about my future internship.
On the 10th of March I officially started my internship at TPA Horwwath Poland in the city of
Warsaw in the tax department of the company.
In the further sections I am going to describe the company in terms of history, background,
general view, international finance, taxation, management, marketing, HR.
II.
TPA Horwath is one of the leading tax advisory and auditing services companies in Central and
South Eastern Europe. More than 1,000 employees work for the TPA Horwath Group at 25
offices in Albania, Austria, Bulgaria, Croatia (exclusive business partner), the Czech Republic,
Hungary, Poland, Romania, Serbia, Slovakia and Slovenia. Our services include tax advisory,
accounting, auditing and advisory in 11 countries.
TPA Horwath is a member of the international network of Crowe Horwath International. This
network is a global association of legally autonomous and independent tax accountants, auditors
and management consultants.
Whatever the request, we offer our clients a comprehensive service, reliability and creativity and
deliver competent solutions promptly. Our work is based on highly specialised qualifications,
experience gained over many years and personal on-site support of our clients. As a forwardlooking service provider with great commitment, we consider ourselves partners of our clients
and take responsibility for our quality and success. We produce comprehensible solutions and
accompany our clients in their realisation.
than 200 members with over 700 offices and approximately 31,000 employees and is one of the
Top Ten consultancy networks worldwide.
At the beginning of 2005, due to TPA becoming a member in the international network of Crowe
Horwath International, the trade name was changed to TPA Horwath which, however, remains
an independent Austrian company.
TPA Horwath today
In the meantime the TPA Horwath Group has become one of the most successful players in the
CEE /SEE-area in its fields of expertise: clients at every location in Central and South Eastern
Europe are, if they so desire, advised not only in the respective national language but also in
German or English.
The proximity to our customers is of particular importance to us and for this reason our location
policy is based on the needs of our clients. In addition to offices in four Austrian provincial
capitals (Graz, Klagenfurt, St. Plten and Vienna), our presence in regional centres is proof of
this philosophy. First-class quality, constantly developing know-how and particular awareness
for the individual situation and needs of our clients are the hallmarks of our work.
2. Philosophy
TPA Horwath sees itself as your partner on your level a partner who you can rely on at all
times. For us the following is true:
To be a consultant means to be a partner committment as integral element of our
corporate culture
As a forward-looking service provider with great commitment, we consider ourselves partners of
our clients and take responsibility for our quality and success. We produce comprehensible
solutions and accompany our clients in their realisation. We are involved in economics and law
by cooperating with the legislature, interest groups, colleges of higher education and universities.
As such we are always a step ahead of the present, which is an advantage for our clients.
Local and global Movement connects
We TPA Horwath are a dynamic and independent consulting concern with tax advisors,
auditors and company advisors. Our roots are in Austria. Numerous local offices guarantee
proximity
to
our
clients.
At
TPA Horwath, competent consultancy extends beyond Austria. This is evidenced by our locations
in the new EU Member States. A leading international network of consultants is at our
disposal worldwide. Our clients have access to this comprehensive know-how.
All-rounders and specialists guaranteeing the optimal service for all clients
Teamwork is of utmost importance at TPA Horwath. All-rounders work with specialists and
specialists work with all-rounders to the benefit of our clients. In particular we offer tax advice,
auditing and business consulting. In terms of consultancy and support, we are experts in the
fields of property issues, the establishment of companies, the re-organisation of companies, legal
forms as well as labour, social and pension law. In addition we offer accounting, balancing and
payroll accounting. With our knowledge we can advise every client comprehensively.
Important is the request and not its size
Whatever the request, we offer our clients a comprehensive service, reliability and creativity and
deliver competent solutions promptly. Our work is based on highly specialised qualifications,
experience gained over many years and personal on-site support of our clients.
11 Countries - 1 Company
TPA Horwath is one of the leading tax advisory and auditing services companies in Austria as
well as in Central and Eastern Europe. We have approximately 1,000 employees in Albania,
Austria, Bulgaria, Croatia (exclusive business partner), Poland, Romania, Serbia, Slovakia,
Slovenia, the Czech Republic and Hungary.
We support our clients in English, German and in each national language in all these countries as
face-to-face-business is important for us. Our services include tax consulting, accounting,
auditing and advisory in 11 countries.
Success and Growth the foundation for the development of people in our company
7
As a result of our success, our continual growth and the mutual attention to the well-being of the
company, we have created the conditions for optimal professional developmental possibilities.
We TPA Horwath attach great importance to ongoing training and are constantly seeking new
challenges to the benefit of our clients. We know that our success has its roots in the qualified
and motivated individuals at TPA Horwath. We support each other in assuming responsibility and
in providing excellence.
Respect and team spirit to enhance our well-being
Mutual respect, team spirit and openness are the hallmarks of our corporate culture. We
encourage an extensive exchange of experience and constructive feedback. Those who work at
TPA Horwath not only have good professional development possibilities but also the free space
they need for continual self-fulfillment.
The TPA Horwath Approach
The TPA Horwath transaction advisory team plays an essential role in every transaction phase.
Our team of experts has extensive project experience in the field of mergers and acquisitions.
Our integrated approach relies on the use of our local experience, individual skills and the knowhow of our experts in implementing internationally recognised methodology and best practices.
The members of our team are experienced advisors in the areas of finance, tax and management.
Furthermore we work in close cooperation with legal advisors and banks. When performing
cross-border transactions, our clients benefit from a uniform application of our services
throughout the TPA Horwath Group. Likewise we affiliate with members of the Crowe Horwath
network when working on a global level. At the same time we offer one project leader and
contact to promote communication and cooperation.
The TPA Horwath partners are at the head of the many experts who are there to support clients
with diverse services and specialist know-how in the fields of tax advisory, accounting,
auditing and advisory.
Since Ive been an intern at TPA Horwath Poland, I would like to focus on the partners operating
in Poland and I would like to focus on presenting the partner and head of our tax department,
Malgorzata Dankowska.
Magorzata Dankowska specializes in transaction advisory and tax restructuring. She has
extensive experience in handling the commercial real estate transactions as well as in
implementation of the structures to optimize the value of real estate projects. She has conducted
numerous optimization projects regarding the international holding structures, investment
financing and disclosure of hidden reserves. She is also a specialist in advising to investment
funds. Her kanguage skills include Polish and English.
4. TPA Horwath Services
Maximum benefits from transactions
One indicator of successful business activity is the constant increase in business value. This can
be achieved by performing mergers and acquisitions and, under such circumstances, it is crucial
to optimize transactions. Risk mitigation, a well-planned strategy and transaction valuation are
the key elements for the success of such an undertaking. Last but not least, success is to a large
9
in
your
language
the
'German
&
English
Desks'
at
every
a. Tax Advisory
Strength through specialisation. TPA Horwarth is one of the leading tax advisory and auditing
company in Central and South Eastern Europe, specialising in tax consultancy. Here you can
discover more about our tax consultancy services.
Tax advisory in Central and South Eastern Europe
TPA Horwath has tax and audit offices in Albania, Bulgaria, Croatia, Poland, Romania, Serbia,
Slovakia, Slovenia, the Czech Republic and Hungary and continues this path in new countries
in Central and South Eastern Europe. Cross-border support of our clients is a given for us. At
every office we offer you a German and English consultant, in accordance with our GermanEnglish Desk concept: We speak your language!
Tax advisory worldwide
TPA Horwath is a member of Crowe Horwath International, a worldwide association of legally
independent tax consultants, auditors and business consultants. 191 member firms with 680 tax
offices in more than 100 countries worldwide and approximately 29,400 employees form the
Crowe Howath International network (Tax Advisory, Risk Management, Accounting, Audit and
Advisory). The international audit and tax association is one of the 'Top Ten' consultancy
networks worldwide. With our network we can provide our clients with high quality, professional
services in all economically significant cities and regions around the globe.
10
b.
Accounting
It is becoming increasingly important for companies to concentrate on and develop their core
business - in many cases accounting is not one of these areas.
Accounting Services in Central and Middle East Europe
It is becoming increasingly important for companies to concentrate on and develop their core
business - in many cases accounting is not one of these areas. Therefore, the finance and
accounting experts at TPA Horwath can offer you extensive support and cross-border knowledge
in financial accounting and payroll accounting at all 25 offices in Central and South East
Europe.
Our Accounting and Financial services:
Financial Accounting
Reporting
Dunning
c. Audit
TPA Horwath Auditing offers you, in addition to the audits of financial statements and special
audits, expert knowledge in business consultancy and in international accounting (IFRS/USGAAP).
11
Annual Audit
Bank Audits
Corporate Accounting
IFRS/US-GAAP Consultancy
12
d. Advisory
In our business consulting, our focus is on the measureable advantages for our clients. In order to
successfully meet the challenges facing every company regardless of its size an
accompanying and transparent project development is of utmost importance to us.
In our business consulting, our focus is on the measureable advantages for our clients. In order to
successfully meet the challenges facing every company regardless of its size an
accompanying and transparent project development is of utmost importance to us.
The basis for individual consultation is a trustful client-adviser relationship along with the
involvement of experienced specialists in the Advisory field, sophisticated, qualitative methods,
and the sound expertise of the Tax and Audit fields. Only in this way can new ideas be developed
and the highest possible reliability achieved when it comes to tailor-made solutions that are of
explicit relevance with regards to decision-making.
Our Advisory Services:
Valuation
Controlling
Corporate Finance
Financial Restructuring
Merger / Acquisition
Organisation & IT
Subsidy Advisory
13
Further on Im going to focus to give a deeper and more detailed insight in the array of services
which TPA Horwath renders for its clients.
Mergers & Acquisitions
Expansion in new markets, strategic re-orientation or re-organisation: mergers and acquisitions
open opportunities for companies of all sizes and in all sectors to increase their business value.
Our services include:
Establishment of a strategy for sell-side mandates regarding bidder profile, purchase price
marketing documents
Verification of third party documents
Preparation and execution of the entire M&A process as well as assistance in preparing
marketing material
Support in preparing and gathering information for a data room and management
meetings
Financing of transactions
Support during negotiations, the bank approval process and the credit facility
documentation process
Implementation of the entire financing process up to the disbursement of funds
Preparation of and support in negotiations with potential investors
Strategic financial consultancy, primarily pertaining to quantitative and qualitative
business development planning
Due diligence
14
Our planning and project performance methodology aims to maximize cost efficiency and to
ensure optimal risk identification and assessment. We investigate areas of business activity which
are exposed to the greatest financial and tax risk.
Financial due diligence
Financial due diligence is performed pursuant to recognized international standards.
Its scope includes:
Verification of tax settlements in light of current regulations within the scope of: CIT,
VAT, PIT, excise duty as well as social insurance contributions and tax on civil law
Valuations
We have extensive knowledge and experience in performing valuations for companies,
institutions and investment funds.
15
Financial Models
We also specialise in building financial models used especially in a decision making process. We
create simulation models supporting solutions for both a single enterprise as well as an entire
sector. Our financial models are based on expert reports. The effects of regulatory changes on the
business environment are assessed and reports on the clients business strategies are provided.
Restructuring
If a company can no longer meet the challenges it faces, a crisis can follow, especially as regards
trust in relations with both creditors and banks. We help to rebuild that trust. We can verify the
objectives of indebted and unprofitable businesses recovery programmes and calculate the
chances of achieving given financial results. Further we evaluate the probability of success and
calculate the rate of return for the bank and other investors.
16
Post-Merger Integration
Due to their complex nature and the need to consider numerous factors, transactions can carry
risks. One of the decisive phases in a transaction is the integration phase. We provide effective
continuation of operational activity assisting in the following processes:
5. Industries
Every sector has its own rules. The better you understand these, the better you can advise your
clients. For us, face-to-face business means eye-level consultancy to take you forward. We speak
your language and know the challenges of your market. Our CEE tax experts unite specialised
and sector knowledge with a passion and love of detail.
Naturally our consultancy extends to all other sectors. Find out about our further services in the
fields of Tax Consultancy, Auditing , Accounting and Advisory in 11 CEE/SEE countries.
The industries we are operating are the following:
III.
Since the place of my internship took place in Poland I would like to analyse the differences
between Polish and Romanian accounting treatments, having the focus on the accounting
treatment of Limited Liability Company form, since the Company that Im working for is a
limited liability one establish under Polish company law. Explain the differences between the
two treatments and why it is important for an international company to focus also on IFRS and
not only Romanian Accounting.
Poland has already adopted IFRS for the consolidated financial statements of all companies
whose securities trade in a regulated market and banks regardless of whether their securities
trade in a regulated market. Poland also permits the use of IFRS for consolidated financial
statements and separate financial statements of certain companies
As a member state of the European Union, Poland is subject to the IAS Regulation adopted by
the European Union in 2002. The EU IAS Regulation requires application of IFRS as adopted
by the EU for the consolidated financial statements of European companies whose securities
trade in a regulated securities market starting in 2005. The EU IAS Regulation gives member
states the option to require or permit IFRS as adopted by the EU in separate company financial
statements (statutory accounts) and/or in the financial statements of companies whose securities
do not trade on a regulated securities market.
The following are the regulated markets in Poland:
Warsaw Stock Exchange, including its main market, derivatives markets, and electronic
trading market.
18
Companies whose securities trade in a regulated market Permit IFRSas adopted by the
EU in the separate company financial statements of a company whose securities trade in a
regulated market.
Companies whose securities do not trade in a regulated market require IFRS as adopted
by the EU for the consolidated financial statements of banks whose securities do not trade
in a regulated market.
Permit IFRSas adopted by the EU for both the consolidated and separate company
financial statements of the following categories of companies whose securities do not
trade in a regulated market:
Accounting records:
According to the Accounting Act of 29 September 1994, joint stock companies are obliged to
maintain full accrualaccounting records.
Books of accounts comprise files of accounting entities, activities (entry totals) and balanc es,
which include:
a journal;
a general ledger;
subsidiary ledgers;
items of property, plant and equipment, including items of property, plant and
equipment under construction, intangible assets as well as related amortization
and depreciation charges;
Taking into account the type and value of individual categories of tangible current assets held by
an entity, the entity's manager shall decide on the use of one of the following methods for
maintaining subsidiary ledger accounts for these asset categories:
value and volume records, where activities and balances of each asset item are
recorded in volume and monetary units;
20
volume records for activities and balances, kept for individual items of assets
or their homogeneous categories exclusively in volume units. The values of
balances are measured at least as at the end of a reporting period for which an
entity settles its income tax liabilities, on the basis of actual data;
value records for activities and balances of goods for resale and packaging,
main tained for retail outlets or storage facilities, where entities are made only
for receipts, transfers and balances of total inventories;
charging to costs the value of materials and goods for resale as at the date of
their purchase, or finished goods at the time of their manufacture, together
with the determination, not later than as at the balance sheet date, of balances
of these items of assets and their valuation, as well as the adjustment of costs
for the value of these balances.
The general rules of accrual accounting under the Polish Accounting Act provide that an entity's
accounting shall include:
Within its adopted accounting principles (policies) an entity may apply simplifications, provided
that it has no significant negative impact on the fulfillment of the obligation.
The adopted accounting principles (policies) must be applied on a consistent basis assuming that
the classification of business transactions, measurement of assets, liabilities and equity, including
21
the amortization or depreciation charges, determination of the financial result, and preparation of
the financial statements are carried out in the same way in consecutive financial years so that the
information resulting there from for the consecutive financial years is comparable.
Balances of assets, liabilities and equity recognized in the books of accounts as at their closing
date must be recognized in the same amounts in the books of accounts opened for the following
financial year.
Accounting principles
According to the Accounting Act of 29 September 1994 joint stock companies are required to
maintain full accrual accounting records and to apply regulation specified in this Act.
Matters that are regulated in the Accounting Act, are accounted for in accordance with the
accounting standards issued by the Accounting Standards Committee. In case where there is no
national standard, the International Accounting Standards may be applied.
All accounting principles must be applied on a consistent basis. Classification of business
transactions, measurement of assets, liabilities and equity, including amortization or depreciation
charges, determination of the financial result, and preparation of the financial statements shall be
carried out in the same way in consecutive years so that the information resulting from there for
the consecutive financial years is comparable.
Fixed assets must be stated in the balance sheet at their acquisition or purchase cost less
accumulated amortization or depreciation and impairment reserves if any. Assets are generally
amortized or depreciated over their estimated useful lives.
When valuing assets and liabilities and preparing the income statement, the following majo r
principles apply:
Generally prudent valuation of each asset item takes place on a cost basis;
fixed assets are valued at acquisition cost, net of depreciation and impairment
reserves if any; raw materials and merchandise, finished products and work in
progress are valued at the lower of cost or net realizable value; certain
financial investments can be valued using the equity method;
22
Valuation of creditors and debtors at their nominal amount less allowance for
doubtful assets; if denominated in foreign currency they need to be
recalculated into Euro;
No offsetting is allowed.
balance sheet;
Limited joint -stock partnerships, which financial statements shall be audited are obliged to
prepare the statement of changes in the entitys own capital, report on entity's activities and a
cash flow statement. The cash flow statement shall be prepared under a direct or indirect method,
depending on a decision of the entitys Management. Limited joint-stock partnerships are obliged
to prepare a report on entity's activities which should include material information on the
property and financial position, including performance assessment and identification of risks and
23
description of threats. If it is material for assessment of the entitys position financial and non
-financial indicators, together with the information relating to environmental and employment
matters, as well as additional explanations to amounts presented in the financial statements.
Both financial statements and report on entity's activities shall be prepared in Polish language
and currency.
Information included in the financial statements may be presented in more details than required
by the Accounting Act, if it results from the needs or a specific character of an entity.
Entities, which in the financial year the financial statements are prepared for and in the preceding
year, failed to reach any two of the following three figures:
total balance sheet assets at the end of the financial year - no more than Polish
currency equivalent of 2,000,000;
net turnover - for the financial year attained or exceeded a Polish currency
equivalent of 5,000,000;
total balance sheet ass ets at the end of the financial year attained or exceeded
a Polish currency equivalent of 2,500,000;
24
Audits of the financial statements shall be aimed at presenting to an entity a written opinion and
report of an external independent auditor as to whether the financial statements show a true and
fair view of the material and financial position and financial result of the examined entity.
Management shall submit Management report and analysis to the financial statement
(constituting part of its additional information, balance sheet, profit and loss account, statement
of changes in entity's own capital, and cash flow statement) for publication within 15 days after
their approval, together with expert auditor's opinion and a copy of a resolution or decision of an
approving body including approval of the financial statements, profit distribution or loss
coverage.
The financial statements shall be published in the official business journal of Poland: Monitor
Polski B.1
Accounting records
Joint-stock companies are required by law to apply double -entry accounting. In particular, such
entities are required to comply with the provisions of the Accounting regula tions conforming to
the European Directives as approved by Order of the Ministry of Public Finance no.3055/2009,
in effect as of 1 January 2010 (Order 3055).
The Romanian accounting system is based on Law no. 82/1991, as republished in the Official
Gazet te of Romania no. 454 of 18 June 2008 (the Accounting Law). This law serves as a
framework for both single -entry accounting as well as for double-entry accounting.
According to the Accounting Law, accounting records should be maintained in the Romanian c
urrency, leu or RON and in the Romanian language. Accounting records of operations
performed in a foreign currency should be maintained both in the Romanian currency as well as
in the respective foreign currency. Financial statements may also be prepared in a foreign
currency for other purposes than in relation to Romanian authorities.
The Accounting Law requires that accounting ledgers and supporting documents should be
stored for a period of 10 years after the end of the financial year to which they refer, and in case
of loss, theft or destruction they should be restored within 30 days.
All entities have the obligation to conduct an inventory of their assets and liabilities at the
beginning of their activity, at least once a year during their operation , as well and in case of
merger, spin -off or dissolution.
Detailed guidance for entities applying double -entry accounting, including the content and form
of financial statements, applicable accounting principles, recognition and measurement rules for
financial statement items and the chart of accounts to be used by entities, is provided by the
Accounting regulations conforming to the European Directives as approved by Order of the
Ministry of Public Finance no. 3055/2009.
The general chart of accounts p rovides the following classes of accounts:
26
The main ledgers to be maintained by entities applying double -entry accounting are:
The Inventory Ledger an accounting document where all the assets and
liabilities are recorded, grouped according to their nature and inventoried
according to the law.
The General Ledger an accounting document that records the movement and
balance fo r each account and serves as the basis for preparation of the trial
balance.
Accounting principles
Annual financial statements must give a true and fair view of an entitys assets, liabilities,
financial position and profit or loss. Qualitative characteristics are attributes that determine the
usefulness of information provided by the financial statements. The main qualitative
characteristics are understandability, relevance, reliability and comparability.
Items presented in the annual financial statements are measured in accordance with general
accounting principles listed below, according to the accrual basis of accounting. Thus, the effects
of transactions and other events are recognized when they occur (and not as cash or cash
equivalent is received or paid) and they are recorded in the accounting records and reported in
the financial statements of the periods to which they relate.
Income and expenses that result directly and jointly from the same transaction are recognised in
the accounting records at the same time, on the basis of a direct association between costs and
related earnings.
The general accounting principles are:
27
Going concern principle. It is presumed that the entity is a going concern and will
continue in operation without liquidating or curtailing materially the scale of its
operations.
Prudence. Assets and revenues should not be overstated and liabilities and
expenses should not be understated. However, the exercise of prudence does not
allow, for example, the creation of excessive provisions , the deliberate
understatement of assets or revenues, or the deliberate overstatement of liabilities
or expenses.
Independence. All revenues and expenses relating to the financial year should be
taken into account, irrespective of the date of receipt or payment of such revenues
or expenses.
Intangibility. The opening balance sheet for each financial year should correspond
to the closing balance sheet of the previous financial year.
Non-compensation of asset and liability items. Asset and liability items or revenue
and expense items should not be offset.
Substance over form. Balance sheet and profit or loss items are presented taking
into account the economic substance of the underlying transactions and not
merely their legal form
Materiality threshold. Certain balance sheet and profit or loss items may be
combined if: they are immaterial in amount; or such combination makes for greater
clarity, provided that the items combined are presented separately in the notes to the
financial statements.
Any departure from the above principles is seen as exceptional and requires disclosure in the
notes to the financial statements, indicating the reasons for departure and its effect s on the
assets, liabilities, financial position and profit or loss.
28
Companies which at the balance sheet date exceed the limits of two of the three size criteria are
required to prepare regular financial statements including a balance sheet, a profit or loss
account, a statement of changes in equity, a statement of cash flows and explanatory notes to the
financial statements.
Companies exceeding two of the three size criteria are required to prepare simplified financial
statements including a simplified balance sheet, a profit or loss account and explanatory notes to
the financial statements; preparation of a statement of changes in equity and a statement of cash
flows is optional. Newly set up entities may prepare for their first reporting period either
simplified financial statements or regular financial statements with five components. In all cases,
the annual financial statements must be accompanied by a directors report.
Auditing
The annual financial statements prepared by entities which at the balance sheet date exceed two
of the three size criteria mentioned above must be audited by one or several ind ividuals or
companies authorised by the Romanian Chamber of Financial Auditors (CAFR).
Statutory auditors are also required to report on the conformity of the directors report with the
annual financial statements. Limited liability companies with more than 15 shareholders are
required to appoint one to three censors, who are responsible for verifying whether financial
statements are prepared according to the law and the underlying accounting ledgers, whether
accounting ledgers are maintained regularly an d whether assets and liabilities were inventoried
according to the law, and are required to report on the above aspects to the general shareholders/
members assembly.
Professional rules applicable to censors are issued by the Romanian Body of Expert and
Licensed Accountants (CECCAR). When not required by law, statutory auditor or censors may
29
be appointed based on shareholders decision. Entities whose annual financial statements are
subject to audit according to the law or to the shareholders decision should also organize an
internal audit function according to CAFR rules.
Publication
The annual financial statements accompanied by the directors report and the aud it report/
censors report, where applicable are subject to approval by the general shareholders/ members
assembly and must be submitted to the Trade Register within 15 days from approval date.
Whenever the annual financial statements and the directors report are published in full, they
must be reproduced in the form and content on the basis of which statutory auditors or censors
have issued their report. They must be accompanied by the full text of the audit report or censors
report, as applicable. If the annual financial statements are not published in full then it must be
indicated that the version published is abridged and reference must be made to the Trade Register
office where they were submitted. If the annual financial statements have not yet be en submitted
to the Trade Register, this fact must be disclosed. The audit report may not be published, but the
entity must disclose whether the report was issued with or without qualification, or was refused,
or whether it includes an emphasis of matter. The proposed appropriation of the profit or
treatment of the loss must be published together with the annual financial statements. The
appropriation of the profit or treatment of the loss must be disclosed in the notes to the financial
statements.
Disclosure
The annual financial statements must be accompanied by the directors report. This report must
provide comments on the entitys development and its financial performance and financial
position and describe the main risks and uncertainties faced by the entity.
The directors report must contain disclosures regarding compliance with legal requirements
regarding own equity, as well as information relating to internal control. Where relevant for
understanding the entitys development, its financial performance and financial position, the
report should include financial and non -financial key performance indicators, including
information on environmental issues and employees. Directors report should also provide
information on:
30
use by the entity of financial instruments, if material relative to its assets, liabi
lities, financial position and profit or loss:
entity's exposure to market risk, credit risk, liquidity risk and cash flow risk.2
3. Project work
IV.
Emerging Markets
No country has gained more influence in Europe in recent years than Poland, where good
2 http://ec.europa.eu/enterprise/policies/sme/businessenvironment/files/annexes_accounting_report_2011/romania_en.pdf
31
The consulting market in Eastern Europe and Russia grew by 12 percent between 2011 and 2012,
making it worth 1.7bn, according to a new report from specialist consulting research group
Source Information Services. The Source report released says that the strong 21 percent growth
in Poland taking it to 358mn.4
A stream of positive economic data releases confirm that economic activity has rebounded in
Poland, confirming our expectations of a robust recovery in 2014 and prompting us to revise up
our growth forecasts to 2.9% and 3.1% in 2014 and 2015, from 2.6% and 2.8% previously.
Poland's Manufacturing Purchasing Managers Index rose to 55.4 in January from 53.2 in
December, indicating an improving pace of expansion from the sector, buoyed by strong German
demand.
The combination of a slightly weaker zloty in the first half of 2014 combined with the recovery
in economic activity underpins our forecast for the National Bank of Poland to begin hiking rates
by Q414 ( see 'FX Rout Bolsters Case For Q4 Tightening', 27 January 2014). PLN 9x12 forward
3 The new world of business, Ian Bremmer, http://fortune.com/2015/01/22/the-new-world-of-business/
4 http://www.theconsultant.eu/news/poland-and-russia-drive-consulting-market.html
32
rate agreements are currently pricing in an 85% probability of 50 basis points of hikes in 2014,
and will probably price in a higher probability by the end March when the 9x12 contract prices
in the entire Q4 period.5
Poland is not an emerging economy anymore it is globally perceived as developed country, but
since TPA Horwath is doing business is 11 countries throughout the CEE and SEE region their
expansion covers also emerging economies. We wouldnt like to discuss all the emerging
economies where TPA Horwath has its business operation, but we would like to focus on two
emerging markets. One case is Serbia a non-EU member emerging market, which is currently
counted as the fastest growing emerging market in Europe outside of the umbrella of the EU.
The second case would be analyzing shortly the case of doing business with an emerging market.
Romania currently counts as being an emerging market and is member of the EU.
http://www.ft.com/intl/cms/s/0/e01823d2-2749-11e0-80d7-00144feab49a.html#axzz3XGZHhIyz
Developed markets or saturated markets are probably the easiest to identify. As the phrase itself
implies, these countries are usually the most advanced economically. As well, they have highly
developed capital markets with high levels of liquidity, meaningful regulatory bodies, large
market capitalization, and high levels of per capita income. Developed markets are found mostly
in North America, Western Europe, and Australasia, including nations like the U.S., Canada,
Germany, the U.K., Australia, New Zealand and Japan.
Different entities have different definitions as to what constitutes a developed market, which can
make the issue somewhat confusing. As a result, a given country can be a developed market
according to one firm and an emerging market according to another. For example, South Korea is
a developed market according to FTSE, but an emerging market according to MSCI as of 2010.
5 http://www.emergingmarketsmonitor.com/market-strategy-market-aligns-our-rateforecast-10-feb-2014
33
Defining emerging markets and frontier markets gets a little trickier. An emerging market is, in
short, a country in the process of rapid growth and development with lower per capita incomes
and less mature capital markets than developed countries. It includes the famed BRICs, Brazil,
Russia, India, and China; and even the PIIGS (Portugal, Ireland, Italy, Greece, Spain also
known by the more politically correct moniker GIPSI).
While, in general, developed markets are considered safer than emerging markets, and the more
developed emerging markets safer than frontier markets, this is not a rule that can be applied
unequivocally. When Singapore, Taiwan, and South Korea are called emerging markets by some
entities, and Greece and Portugal are categorized as developed markets, its apparent that
developed markets are not always safer than emerging ones.
When investing in foreign markets, its important to bear in mind the differences between
developed, emerging, and frontier markets in order to better understand the risk, liquidity, and
growth potential of a given country.
a. Marketing Approach
Your approach to marketing is typically quite different in an established versus emerging market.
Customers usually have familiarity with industries and products that have been around for a
while. This awareness means your marketing is more focused on communicating your company
or brand value. In newer or emerging markets, customers need to first know what types of
providers and solutions meet the needs or wants they now recognize. If you offer a new
technology or solution, you typically have to explain the basics first.
b. Brand Significance
The role of brands is different in newer and older markets. In new markets, customers tend to
rely more on reputable brand names, according to a May 2010 article by integrated marketing
agency MillwardBrown. As a market becomes more established and competitors and generic
options become more available, brand names become less significant to some customers. Thus, if
you operate a retail business targeting an emerging market, you may benefit more by promoting
that you offer top brands. If you serve a mature market, you may attract more customers with an
array of brands at various price points.
34
c. Competition
The level of competition you face varies by market status. Emerging markets initially have few
players. In fact, you might be the first mover if you recognize market trends or developments
early. As more companies become aware of the new market and customer base, competition
enters. If the market grows and experiences success, additional customers may come along.
Mature markets usually have a number of established providers to match demand from the
marketplace.
d. Opportunities
An emerging market offers a tremendous opportunity to capture new customers as they make
provider decisions. If you can quickly attract and satisfy customer needs, you can become a
leading provider in that market. Redbox established itself as a first mover in movie and game
rental kiosks and grew quickly as the marketplace shifted toward this rental format. As an
established provider in a mature market, you can leverage existing customer relationships for
repeat business and to sell additional goods and services over time.
Our company group, TPA Horwath Group, operates in over 11 countries and employs in total
around 1,000 employees in 22 offices. These 11 countries comprise of Albania, Bulgaria,
Croatia (exclusive business partner), Poland, Romania, Serbia, Slovakia, Slovenia, the Czech
Republic and Hungary. Besides the Poland, Slovakia, Slovenia and the Czech Republic all the
other countries are listed by the IMF as emerging markets. So we can definitely state that TPA
Horwath Group is a company which operates in both emerging and saturated markets.
https://hbr.org/2005/06/strategies-that-fit-emerging-markets
important pan-European corridors. These have links with Europe from west-to-east and north-tosouth, while water transport not only comes inland via the Danube but also at the Black Sea via
Romanias largest seaport at Constanta.
Now a part of the EU single market and NATO, Romania is split into 42 counties, divided among
eight development regions, all aimed at supporting and stimulating economic growth. Areas of
great potential due to the regions extensive natural resources include tourism and agriculture,
energy and services. Automotives, IT & ICT, green energy, oil and gas, pharmaceuticals, food
production, aeronautics, shipyards, R&D and mining are also dynamic sectors. While those
recording the highest growth, with the most potential include transport, telecommunications,
banking, insurance and, again, tourism.
Greatly improving on the disappointing 1.8 billion EUR of EU Cohesion Policy funding for the
period of 2007 to 2013, prospects are looking more positive for doing business in Romania with
its most recent 22 billion EUR endowment, received for the period of 2014 to 2020. Public
investment will continue to focus on regional operations, infrastructure and transport, as well as
the environment. Green energy remains a priority, with the government aiming to invest a
projected 18 billion EUR of EU funding into meeting its 20-20-20 target, by establishing new
sources of renewable energy across biomass, hydro, solar, wind, geothermal, bio fuels and
others.
For businesses looking to invest in the economy of Romania, the government offers
opportunities for PPP priority projects. In 2013, a PPP agreement was signed between Remat
Group Management and BS Recycling with the countrys economy ministry, to invest approx.
1.9 million EUR in modernising the dolomite and limestone mine of Bihor county. Meanwhile,
significant moves towards privatising major state corporations across railway freight, chemical
production, mining and energy are underway, while the government has also implemented three
SEZ locations offering aid, exemptions and fiscal incentives for new enterprise.
Right now, there are several road projects under way and boosting the economy in Romania,
including the Comarnic Brasov highway, with EU funds of over 4.5 billion EUR being
allocated to motorway construction and rail rehabilitation. Government support is also focusing
36
on investment and initiatives across crafts production and manually manufactured products,
while developing and establishing business and technological incubators.
One sector with the greatest and most diverse potential for business in Romania is tourism. The
region is teeming with attractions, across its awesome natural beauty, historical rural architecture
and small wood and craftwork industry. There are three biosphere reservations in a country that
also boasts a third of the natural springs of the whole of Europe. That means a wealth of areas
enjoying natural therapeutic factors and the opportunity for business and investment in
ecotourism that comes with it.
According to the World Bank the Gross Domestic Product (GDP) of the economy of Romania in
2012 was worth approx. 122 billion EUR. The country averaged approx. 55 billion EUR from
1987 to 2012, peaking at 147 billion in 2008. During the GEC to follow though, Romania fell
into a deep recession but moderate growth has resumed. In 2014, the country was awarded its
highest economic freedom score to date, reaching 65.5 and making it the 62nd freest economy in
the world, the 29th out of 43 in Europe. But most importantly, this new peak means the country
has advanced 23 points in 20 years, the eighth best improvement of any country and a fair
indication of the possiblity for exponential growth. With further strucutral reforms and
government efforts to privatise the rail, mining, and petrochemical sectors to come, the
Romanian economy is primed for a comeback.6
a. The case of XY S.A. and TPA Horwath Sztuba Kaczmarek spo.z.o.o.
Regarding company relationships with emerging market clients I would like to discuss a case
that I was part of during my internship period.
Our emerging market partner was a company from Romania, XY S.A., a producer of single use
packages, which is continuously importing these packages to its business partner here in Poland
AB sp.z.o.o. Since these operations consist as intra-cumminity acquisitions ans supplies our
department was responsible to claim VAT returns and file VAT compliance for between these
companies the last 5 years.
6 http://emerging-europe.com/regional-opportunities/romania/romanian-economydoing-business-in-romania-gdp/
37
Since Poland has one of the most rigorous taxation, documentation and compliance systems in
the whole EU, differences in billing and formalities were standing in the way between the two
companies for a long time. The main problem on this years-long path collaboration happened to
be the language barrier.
First of all I would like to mention that even though our company is an international company
and comprises both English and German speaking desk the very big majority of the employees
has fairly poor communication skills in English. This doesnt apply only to partners, managers
and supervisors whose foreign language skills are outstanding.
Unfortunately since lower level employees, in our case tax consultants, have the responsibility to
keep contact with the clients miscommunication happened and discrepancies occurred between
the two parties.
It is very important to mention as well that the representant of the Romanian company didnt
have the adequate English skills to understand e-mails correctly and to understand and use fiscal
legal terms in English. As my bachelor degree is legal studies, one aspect has to be taken in
account, since in England, U.S. and other English speaking countries a different legal system is
used than in continental Europe, which is called Common Law system, different legal
institutions, procedures, documents are present in these two very different systems. Ergo direct
and correct translation of legal terms used in the continental law system to their counterparts in
the common law system and vice versa is fairly impossible or poses some incredible challenges
which end up in different interpretations. A good example of this can be taking a look at the
rulings issued by international or European courts, which are usually issued in French and
English.
Solving the problem
The first step in solving this problem arisen as a result of miscommunication and language
barrier was to send an e-mail to our Romanian partner both in English andRomanian, taking
advantage of my language skills and client management skills, inviting him for a teleconference,
where me playing the role of a real time translator, I will mediate and moderate the conversation
between two supervisors and our client.
emerging countries? How would you see a relationship with the employees / partners?
Is the company doing business in emerging markets?
V.
International Investments
The EU membership has shaped major aspects of economic policy and new legislation. Poland is
the largest economy among the CEE countries with the population of 38.6 million. The most of
the statistics used in this paper is based on the Polish Information and Foreign Investment
Agency (PAIiIZ) sources. In this part of the study Im focusing mainly on data from or around
year 2005 about Poland, since our company entered the Polish market in the year of 2005. This
archived data comes from from the following sources: United Nations Conference on Trade and
Development (UNCAD), United Nations Economic Commission for Europe (UNECE), World
Investment Reports, as well as other selected databases. In 2005 Poland was the 5th most
preferred investment location worldwide. Poland jumped from 12th to 5th place in the Index
since 2000, which was driven by increased interest from U.S. and European investors. One in 10
global investors indicated they will make first-time investments in Poland.
Since TPA Horwath is one of the leading tax advisory and auditing services companies in
Central and South Eastern Europe and their services consist mostly of tax advisory, accounting,
auditing and advisory and the companys experts are particularly competent in the areas of real
estate, the founding of companies, the re-organisation of companies and successors, in the
organization of legal forms as well as in labour, social and pension law we can identify our
company as being part of the advisory and financial services sector.
TPA Horwath Group operates on franchise basis, first of all it is a member of the Crowe
Horwath International group with its headquarters in Switzerland. Second of all TPA Horwath
Group was established in Austria and their first expansion outside the Austrian borders happened
to be in the 90s to Hungary. The Hungarian office was the result of FDI from Austria. But after
gaining reputation and fame in the advisory industry a franchise system has been established.
TPA Horwath Poland was established in 2005 by Sztuba Kaczmarek and is a spoo.z.o.o., which
means its an LLC. Even though the Polish branch is not a result of FDI theres a strong
collaboration and ongoing communication among the member countries of the TPA Horwath
Group.
39
The only way I could see TPA Horwath Poland as a capital exporting company is to outsource some
of its activities abroad, like marketing and HR, but certainly not their tax department and hotel
industry division.
For the point of keeping their tax department and hospitality service branch inside the borders of
Poland is that the knowledge required in these fields is very country and market specific. Since Ive
been part of their tax department mainly during my internship there it really proved that without
Polish language its impossible to work with taxes in Poland. Knowledge of the Polish regulations is
inherent and also all legal documents are mandatorily required to prepared in Polish language. Only
relationship with some clients is held in either English or German, but then again the problems
discussed with them require the knowledge of Polish legal rules.
For their marketing department I would argue the preparation of client brochures maybe in local
languages or outsourcing the marketing position to a market where they would want to invest in
another office later on. Because locals always know better the local market and theirs is a significant
difference between the Polish financial services and banking sector and the rest of the CEE and SEE
countries, since Poland in these two specific sectors is way ahead of its neighbouring countries in the
post-communist block.
HR services could be outsourced as well, mostly recruiting services which dont necessarily require
physical presence in the country like headhunting. But since the labour costs in Poland are still
significantly lower than in western Europe and only a bit higher than in the rest of its region, I dont
think that outsourcing would be an option for the company. In my opinion it hides more risks than
benefits.
40
VI.
International Finance
It increases the managements control over the companys cash-flows and profitability
Your incomings are denominated in one currency and your payments are denominated in
another currency
You have a time gap between incomings and the corresponding payments
You use a certain level of the exchange rate when pricing your products
42
2nd in the World for domiciled funds (behind the United States)
Economic, social and political stability ensuring a secure legal and tax framework
Participation exemption : total exemption for dividends and capital gains income if 10%
shareholding or acquisition price of 1.2 m. for dividends / 6m. for capital gains and 12
months holding period
An 80% exemption for net income deriving from certain IP rights and capital gains
realized on the sale of IP
No CFC rules
64 double tax treaties (latest treaties : Hong Kong, Bahrain, Qatar, ...)
There is also an applicable double tax treaty between the Grand Duchy of Luxembourg and the
Republic of Poland.
SOPARFIS
In 1990, the Luxembourg legislator implemented the European Union Parent-Subsidiary
Directive for Luxem bourg fully taxable resident corporations. As a result, the so-called
participation exemption for dividends and capital gains derived from significant shareholdings
44
was introduced into Luxembourg law. This law gave rise to a new type of Holding Company that
was soon to be known under the name of Socit de Participations Financires (hereafter
Soparfi).
The SOPARFI is a fully taxable Luxembourg resident company that takes advantage of the
participation exemption in Luxembourg and that may benefit from double taxation treaties
signed by Luxembourg as well as the provisions of the EU Parent-Subsidiary Directive.7
Tax treatment of the SOPARFI
Further on I would like to present the important tax aspects of the SOPARFI holding structure
regarding Corporate income tax: dividends-, sale- and liquidation proceeds from the hypothetical
point of view of TPA Horwath Poland.
If a parent company in Luxembourg (SOPARFI) generates profits from dividends, sales or
liquidation from a subsidiary company, the said profits will be exempt from corporation tax
under the following conditions:
Status of the parent company
a corporation with its registered office in Luxembourg with unlimited liability to tax, or
a corporation with its registered office in Luxembourg with unlimited liability to tax, or
an EU subsidiary company within the meaning of the parent subsidiary Directive, namely
it must be liable to corporate taxation (the rate is not required to correspond to the
equivalent rate in Luxembourg) in our case TPA Horwath Poland
7 http://www.luxembourgforfinance.com/sites/luxembourgforfinance/files/lffbrochure-soparfi.pdf
45
other foreign subsidiary: it is required that it always be liable to a rate of corporation tax
corresponding to Luxembourg's rate of tax on the comparable income (in practice this is
generally at least 15%).
at least 10% of the capital or acquisition costs of at least 1,200 EUR for dividends or
acquisition costs of at least 6,000 EUR for sale profits.
12 months on the day of the distribution of the dividends (or on the day of the realisation
of the income) or an undertaking to hold the investment of the required extent
uninterrupted for a period of at least 12 months. The said requirements must be satisfied
for the extent of the investment as a whole (there is no individual assessment of each
share).
Partial write-offs to the going value of the inter-corporate privilege investment are
deductible. A sale profit potentially exempt from tax shall be liable to tax insofar as it has
been attributed in connection with the investment-related expense or previous partial
write-offs which have influenced Luxembourg's basis of assessment and which has not
been neutralised by an interim appreciation.
In assessing the tax-free sale profits, value adjustments to claims against subsidiary companies
will be treated as partial write-offs of the value of the investment. This means that they will be
taken into account when calculating the tax-free sale profit.
46
Investments are excluded from the basis of assessment for net wealth tax if they
correspond to 10% of the capital of a corporation (resident in or outwith Luxembourg)
with unlimited liability to tax or the purchase price thereof amounts to at least 1,200
EUR.
If a reserve for the next five tax years is shown in the balance sheet, the net wealth tax
may be reduced by 1/5 of the said reserve. This reduction is limited to corporate income
tax inclusive of the solidarity surtax.
Withholding tax
On distributed dividends
In general, dividends distributed by a SOPARFI are liable to withholding tax at a rate of 15%.
Notwithstanding this, a SOPARFI is exempt from withholding tax upon satisfaction of the
following conditions:
In our case according to the DTT applicable between Poland and Luxembourg the withholding
tax is as of 5%.
On interest payments Interest payments are not liable to withholding tax in Luxembourg.
47
On liquidation proceeds
In the case where a SOPARFI is liquidated, the distribution of the liquidation proceeds are free
from withholding tax - irrespective of the recipient's tax status.
8
innovation, supply chains and routes to market in one industry or sector may turn out to be quite
different in another9
years 2001 and 2003, and also one of the highly valued domestic wind energy market analysis
published in the form of annual reports -"Wind energy in Poland."
In 1999-2004,senior tax advisory manager in one of the Big 4 advisory companies. Since 2004
partner in the Corporate Tax Consulting, Ltd., which was transformed in 2005 into TPA Horwath
Sztuba Kaczmarek Sp. z o. o. Since 2006, the managing partner of TPA Horwath Group in
Poland. He is a certified tax advisor since 1999.
Krzysztof Kaczmarek specializes in tax advisory for commercial real estate sector among
others he provides tax due diligence, transaction advisory projects as well as restructuring and
reorganisation processes. Krzysztof
experiences include also representing clients before tax authorities and Provincial Administrative
Courts and the Supreme Administrative Court as well as consulting during transactions involving
restructuring and reorganization of Polish and international companies.
In 1999-2004 he worked as a tax advisor at Ernst & Young Polska and as the expert of the
Mergers & Acquisitions group he was responsible for execution of a number of restructuring
projects. Since July 2004 he has been a partner at Corporate Tax Consulting s.c. which in March
2005 was transformed into TPA Horwath Sztuba Kaczmarek Sp. z o.o.
Since October 2012 he has been a member of the four-person Steering Committee, in which he
develops the strategic directions of TPA Horwath International Group and oversees
implementation of strategic solutions in different countries.
While a licensing agreement involves things such as intellectual property, trade secrets and
others while in franchising it is limited to trademarks and operating know-how of the business.
Advantages of the international franchising mode:
Low cost
Well selected partners bring financial investment as well as managerial capabilities to the
operation.
Franchisees may take advantage of acquired knowledge and become competitors in the
future
I would like to stress upon some aspects which are crucial if a company wants to expand in
another country and wants to have a successful business in the specific country. According to our
group policies I would like to present some key aspects:
Consult with diverse management teams to understand the implications of headquartersbased decisions on other markets.
Make sure that there is a link between company values and employee behavior;
management incentives can be a useful tool to strengthen this link.
Increase the diversity of management teams so that they better reflect the breadth of the
company's geographical footprint.
51
Allow executives to express their diversity rather than conform with a homogenous
corporate culture.
Global leaders play a key role in shifting their business to a global mindset. This mindset
requires leaders to:
Leaders must adopt a balancing act to ensure cultural differences don't lead to roadblocks.
Look to underlying values to bridge cultural differences. Global companies must find a
dynamic integration between local autonomy and centralized control. Autonomy gives
regional managers the freedom to take advantage of market-specific opportunities and
adapt the business to suit local needs and customs. But control enables an efficient
allocation of resources and facilitates the sharing of global capabilities and resources.
Value the expression of diversity. Most companies understand that diversity is good for
business. But as we explored in our report Winning in a polycentric world business
leaders struggle to convert this belief into action10
I think the biggest underlying success factor in TPA Horwath Polands history so far is that the
founders of the company, who in marketing terms are the franchisors of the brand are of Polish
origin. They finished their studies in Poland which means that they are familiar with the
language, laws and economic and financial environment.
The knowledge of Polish language in business relations is very important, during my internship
and also other encounters with Polish nationals I realized, that Polish people are generally bad at
foreign languages, including English. Polish culture and values are also quite different from the
10 TPA Horwath Group Carta
52
rest of Europe since, Poland is a generally conservative country and in fact 94% of the Polish
population claims itself to be of catholic religion.
I would like to make a comparison between the country of origin of the TPA Horwath Group,
which is Austria and Poland using Hofstedes 6 dimensions.
Austria
Power distance This dimension deals with the fact that all individuals in societies are not equal
it expresses the attitude of the culture towards these inequalities amongst us. Power distance is
defined as the extent to which the less powerful members of institutions and organisations within
a country expect and accept that power is distributed unequally.
Austria scores very low on this dimension (score of 11) which means that the following
characterises the Austrian style: Being independent, hierarchy for convenience only, equal rights,
superiors accessible, coaching leader, management facilitates and empowers. Power is
decentralized and managers count on the experience of their team members. Employees expect to
53
be consulted. Control is disliked and attitude towards managers are informal and on first name
basis. Communication is direct and participative.
Individualism The fundamental issue addressed by this dimension is the degree of
interdependence a society maintains among its members. It has to do with whether peoples selfimage is defined in terms of I or We.In Individualist societies people are supposed to look
after themselves and their direct family only. In Collectivist societies people belong to in
groups that take care of them in exchange for loyalty.
Austria, with a score of 55 is an Individualistic society. This means there is a high preference for
a loosely-knit social framework in which individuals are expected to take care of themselves and
their immediate families only. In individualistic societies offence causes guilt and a loss of selfesteem, the employer/employee relationship is a contract based on mutual advantage, hiring and
promotion decisions are supposed to be based on merit only, management is the management of
individuals.
Masculinity A high score (masculine) on this dimension indicates that the society will be driven
by competition, achievement and success, with success being defined by the winner / best in
field a value system that starts in school and continues throughout organisational behaviour.
A low score (feminine) on the dimension means that the dominant values in society are caring for
others and quality of life. A feminine society is one where quality of life is the sign of success
and standing out from the crowd is not admirable. The fundamental issue here is what motivates
people, wanting to be the best (masculine) or liking what you do (feminine).
At 79, Austria is a masculine society highly success oriented and driven. In masculine
countries, people live in order to work, managers are expected to be decisive, the emphasis is
on equity, competition and performance. Conflicts are resolved by fighting them out. A clear
example of this dimension is seen around election time, with ferocious, no-holds barred battles
between candidates.
Uncertainty avoidance
society deals with the fact that the future can never be known: should we try to control the future
54
or just let it happen? This ambiguity brings with it anxiety and different cultures have learnt to
deal with this anxiety in different ways. The extent to which the members of a culture feel
threatened by ambiguous or unknown situations and have created beliefs and institutions that try
to avoid these is reflected in the UAI score.
Austria scores 70 on this dimension and thus has a preference for avoiding uncertainty. Countries
exhibiting high uncertainty avoidance maintain rigid codes of belief and behaviour and are
intolerant of unorthodox behaviour and ideas. In these cultures there is an emotional need for
rules (even if the rules never seem to work) time is money, people have an inner urge to be busy
and work hard, precision and punctuality are the norm, innovation may be resisted, security is an
important element in individual motivation. Decisions are taken after careful analysis of all
available information.
Long Term Orientation This dimension describes how every society has to maintain some
links with its own past while dealing with the challenges of the present and futur, and societies
prioritise these two existential goals differently. Normative societies who score low on this
dimension, for example, prefer to maintain time-honoured traditions and norms while viewing
societal change with suspicion. Those with a culture which scores high, on the other hand, take a
more pragmatic approach: they encourage thrift and efforts in modern education as a way to
prepare for the future.
The Austrians score 60, making it a pragmatic culture. In societies with a pragmatic orientation,
people believe that truth depends very much on the situation, context and time. They show an
ability to easily adapt traditions to changed conditions, a strong propensity to save and invest,
thriftiness and perseverance in achieving results.
Indulgence One challenge that confronts humanity, now and in the past, is the degree to which
little children are socialized. Without socialization we do not become human. This dimension
is defined as the extent to which people try to control their desires and impulses, based on the
way they were raised. Relatively weak control is called indulgence and relatively strong
control is called restraint. Cultures can, therefore, be described as indulgent or restrained.
55
Austria is an indulgent country with a high score of 63. People in societies classified by a high
score in indulgence generally exhibit a willingness to realise their impulses and desires with
regard to enjoying life and having fun. They possess a positive attitude and have a tendency
towards optimism. In addition, they place a higher degree of importance on leisure time, act as
they please and spend money as they wish.11
Poland
Power distance This dimension deals with the fact that all individuals in societies are not equal
it expresses the attitude of the culture towards these inequalities amongst us. Power distance is
defined as the extent to which the less powerful members of institutions and organisations within
a country expect and accept that power is distributed unequally.
At a score of 68, Poland is a hierarchical society. This means that people accept a hierarchical
order in which everybody has a place and which needs no further justification. Hierarchy in an
organization is seen as reflecting inherent inequalities, centralization is popular, subordinates
expect to be told what to do and the ideal boss is a benevolent autocrat
Individualism The fundamental issue addressed by this dimension is the degree of
interdependence a society maintains among its members. It has to do with whether peoples selfimage is defined in terms of I or We. In Individualist societies people are supposed to look
after themselves and their direct family only. In Collectivist societies people belong to in
groups that take care of them in exchange for loyalty.
Poland, with a score of 60 is an Individualistic society. This means there is a high preference for
a loosely-knit social framework in which individuals are expected to take care of themselves and
their immediate families only. In individualistic societies offence causes guilt and a loss of selfesteem, the employer/employee relationship is a contract based on mutual advantage, hiring and
promotion decisions are supposed to be based on merit only, management is the management of
individuals.
11 http://geert-hofstede.com/austria.html
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The Polish culture houses a contradiction: although highly individualistic, the Polish need a
hierarchy. This combination (high score on power distance and high score on Individualism)
creates a specific tension in this culture, which makes the relationship so delicate but intense
and fruitful once you manage it.
Therefore, the manager is advised to establish a second level of communication, having a
personal contact with everybody in the structure, allowing to give the impression that
everybody is important in the organization, although unequal.
Masculinity A high score (masculine) on this dimension indicates that the society will be driven
by competition, achievement and success, with success being defined by the winner / best in
field a value system that starts in school and continues throughout organisational behaviour.
A low score (feminine) on the dimension means that the dominant values in society are caring for
others and quality of life. A feminine society is one where quality of life is the sign of success
and standing out from the crowd is not admirable. The fundamental issue here is what motivates
people, wanting to be the best (masculine) or liking what you do (feminine).
Poland scores 64 on this dimension and is thus a masculine society. In masculine countries
people live in order to work, managers are expected to be decisive and assertive, the emphasis
is on equity, competition and performance and conflicts are resolved by fighting them out.
Uncertainty avoidance The dimension Uncertainty Avoidance has to do with the way that a
society deals with the fact that the future can never be known: should we try to control the future
or just let it happen? This ambiguity brings with it anxiety and different cultures have learnt to
deal with this anxiety in different ways. The extent to which the members of a culture feel
threatened by ambiguous or unknown situations and have created beliefs and institutions that try
to avoid these is reflected in the UAI score.
Poland scores 93 on this dimension and thus has a very high preference for avoiding uncertainty.
Countries exhibiting high uncertainty avoidance maintain rigid codes of belief and behaviour and
are intolerant of unorthodox behaviour and ideas. In these cultures there is an emotional need for
rules (even if the rules never seem to work) time is money, people have an inner urge to be busy
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and work hard, precision and punctuality are the norm, innovation may be resisted, security is an
important element in individual motivation.
Long Term Orientation This dimension describes howevery society has to maintain some links
with its own past while dealing with the challenges of the present and future, and societies
prioritise these two existential goals differently. Normative societies who score low on this
dimension, for example, prefer to maintain time-honoured traditions and norms while viewing
societal change with suspicion. Those with a culture which scores high, on the other hand, take a
more pragmatic approach: they encourage thrift and efforts in modern education as a way to
prepare for the future.
Poland's low score of 38 in this dimension means that it is more normative than pragmatic.
People in such societies have a strong concern with establishing the absolute Truth; they are
normative in their thinking. They exhibit great respect for traditions, a relatively small propensity
to save for the future, and a focus on achieving quick results.
Indulgence One challenge that confronts humanity, now and in the past, is the degree to which
little children are socialized. Without socialization we do not become human. This dimension
is defined as the extent to which people try to control their desires and impulses, based on the
way they were raised. Relatively weak control is called indulgence and relatively strong
control is called restraint. Cultures can, therefore, be described as indulgent or restrained.
With a low score of 29, Polish culture is one of restraint. Societies with a low score in this
dimension have a tendency to cynicism and pessimism. Also, in contrast to indulgent societies,
restrained societies do not put much emphasis on leisure time and control the gratification of
their desires. People with this orientation have the perception that their actions are restrained by
social norms and feel that indulging themselves is somewhat wrong12.
IX.
Based on the company's activity, discuss at least 2 out of the 3 elements presented below.
12 http://geert-hofstede.com/poland.html
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Make sure you present methods, principles or techniques used by the company and provide
data for it.
Overview of appraisal
The basic purpose of systematic appraisal is to achieve better spending decisions for capital and
current expenditure on schemes, projects and programmes. This document provides an overview
of the main analytical methods and techniques which should be used in the appraisal process.
These techniques can also be used in the evaluation process.
1. Capital Budgeting Process. Investment Decision Criteria.
Analytical methods
The recommended analytical methods for appraisal are generally discounted cash flow
techniques which take into account the time value of money. People generally prefer to receive
benefits as early as possible while paying costs as late as possible. Costs and benefits occur at
different points in the life of the project so the valuation of costs and benefits must take into
account the time at which they occur. This concept of time preference is fundamental to proper
appraisal and so it is necessary to calculate the present values of all costs and benefits.
Net Present Value Method (NPV)
In the NPV method, the revenues and costs of a project are estimated and then are discounted
and compared with the initial investment. The preferred option is that with the highest positive
net present value. Projects with negative NPV values should be rejected because the present
value of the stream of benefits is insufficient to recover the cost of the project.
Compared to other investment appraisal techniques such as the IRR and the discounted payback
period, the NPV is viewed as the most reliable technique to support investment appraisal
decisions. There are some disadvantages with the NPV approach. If there are several independent
and mutually exclusive projects, the NPV method will rank projects in order of descending NPV
values. However, a smaller project with a lower NPV may be more attractive due to a higher
ratio of discounted benefits to costs (see BCR below), particularly if there affordability
constraints.
Using different evaluation techniques for the same basic data may yield conflicting conclusions.
In choosing between options A and B, the NPV method may suggest that option A is preferable,
while the IRR method may suggest that option B is preferable. However in such cases, the results
indicated by the NPV method are more reliable. The NPV method should be always be used
where money values over time need to be appraised. Nevertheless, the other techniques also
yield useful additional information and may be worth using.
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The key determinants of the NPV calculation are the appraisal horizon, the discount rate and the
accuracy of estimates for costs and benefits.
Discount rate
The discount rate is a concept related to the NPV method. The discount rate is used to convert
costs and benefits to present values to reflect the principle of time preference. The calculation of
the discount rate can be based on a number of approaches including, among others:
The same basic discount rate (usually called the test discount rate or TDR) should be used in all
cost-benefit and cost-effectiveness analyses of public sector projects.
The current recommended TDR is 5%. However, if a commercial State Sponsored Body is
discounting projected cash flows for commercial projects, the cost of capital should be used or
even a project-specific rate.
Internal Rate of Return (IRR)
The IRR is the discount rate which, when applied to net revenues of a project sets them equal to
the initial investment. The preferred option is that with the IRR greatest in excess of a specified
rate of return. An IRR of 10% means that with a discount rate of 10%, the project breaks even.
The IRR approach is usually associated with a hurdle cost of capital/discount rate, against which
the IRR is compared. The hurdle rate corresponds to the opportunity cost of capital. In the case
of public projects, the hurdle rate is the TDR. If the IRR exceeds the hurdle rate, the project is
accepted.
There are disadvantages associated with the IRR as a performance indicator. It is not suitable for
the ranking of competing projects. It is possible for two projects to have the same IRR but have
different NPV values due to differences in the timing of costs and benefits. In addition, applying
different appraisal techniques to the same basic data may yield contradictory conclusions.
- Present the basic principles and methods used in investment decision, e.g. Net
Present Value, Internal Rate of Return, Payback Period, Average Accounting Rate of Return,
Profitability Index.13
2. Cost of Capital.
13 http://publicspendingcode.per.gov.ie/overview-of-appraisal-methods-andtechniques/
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Practitioners typically are confronted with this situation: I know how to value a
business in my country, but this one is in Country X, a developing economy.
What should I use for a discount rate? The basic insight of capital market
theory, that expected return is a function of market risk, still holds when dealing
with cost of equity capital in a global environment.
Estimating a proper cost of capital in developed countries, where a relative
abundance of market data and comparable companies exists, requires a high
degree of expertise. Estimating cost of capital in less-developed (i.e.
emerging) countries can present an even greater challenge, primarily due to
lack of data (or poor data quality) and the potential for magnified financial,
economic, and political risks. A good understanding of cost of capital concepts
is, therefore, essential information for executives making global investment
decisions.
Cost of Different Sources of Capital, e.g. Cost of Debt, Cost of Preferred Stock, Cost
of Common Equity
3. Working Capital Management, e.g.
Managing and Measuring Liquidity.
Investing Short Term Funds: Short term investing instruments, Strategies.
Managing Accounts Receivable.
Managing Accounts Payable.
Managing Short Term Financing, e.g. Sources of short term financing, Asset-based
loans, Computing the cost of borrowing
Note! When answering the questions for each
X.
Sources
XI.
Appendix
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