IBR, Going Concern Prognosis and IDW Restructuring Opinion

Building trust and transparency: Successful crisis management for companies

In times of significant changes in a company’s situation or during crises, building trust among all stakeholders, particularly lenders, is a key component of successfully overcoming challenges. It is essential to create transparency about the current situation, develop a clear plan, and communicate it effectively.

Established tools in the market can be utilized for this purpose. For example, conducting an Independent Business Review (IBR) is recommended to provide stakeholders with the necessary information. In restructuring situations where the company is on the brink of insolvency, a going concern prognosis is typically required in Austria (German equivalent: IDW S6 expert opinion).

Depending on your situation, we can provide extensive support in preparing these reports and guide you through the process.

For a successful restructuring, it is essential to quickly assemble a small, dedicated turnaround team: motivated representatives from key areas of the company with whom we can develop and implement measures.

Independent Business Review (IBR)

An Independent Business Review (IBR) is a detailed assessment of a company’s financial and operational situation, conducted by an independent third party. It provides stakeholders such as investors, lenders, and company management with an objective evaluation of the business. Unlike a going concern prognosis, an IBR is less standardized and can be tailored in scope and focus to the specific situation.

An IBR offers investors, lenders, and other stakeholders a comprehensive evaluation of the company’s financial and operational performance, thereby providing the necessary transparency and building trust. By delivering in-depth analyses and assessments, an IBR enables stakeholders to make informed decisions, which can range from strategic or financial decisions to operational actions.

Forget piecemeal tactics! A comprehensive view of the situation and a prioritized action plan must be put on the table and communicated quickly.

Going Concern Prognosis

A going concern prognosis (Fortbestehensprognose) is particularly relevant in situations where a company shows signs of financial distress or is threatened by insolvency. This is primarily due to the Austrian Insolvency Code (IO) and the rulings of the Supreme Court with regards to the two-tiered examination of over-indebtedness. If a positive going concern prognosis can be established there is no obligation to file for insolvency due to over-indebtedness under insolvency law.

You can find more information about the numerous legal reasons for preparing a going concern prognosis in our newsletter 01/2021 – Continuation Forecast and Going Concern Prognosis » Management Factory (mf.ag). Further, the prognosis allows stakeholders to better understand and assess the financial situation of a company and whether it will be able to meet its ongoing obligations. As such, a going concern prognosis can also play a key role in stakeholder communication. The results of the prognosis can be used to enhance communication with various stakeholders, including banks, investors, suppliers, and employees, thereby strengthening trust in the company.

For the preparation of going concern prognosis, a joint statement was published by the Chamber of Public Accountants and the Austrian Chamber of Commerce. Therefore, unlike an Independent Business Review (IBR), a going concern prognosis must meet specific formal requirements.

Restructuring without knowledge of the balance sheet is like driving without a license.

A going concern prognosis provides an assessment and projection of a company’s future financial condition and performance. It includes an analysis of the company’s financial situation, including its current liquidity, financial obligations, operational performance, and prospects. Based on this analysis, various scenarios are examined and evaluated to assess the company’s short-term solvency and long-term viability.

The contents of a going concern prognosis cover various aspects of the company’s situation, including:

• Market and Competitive Analysis: An evaluation of the macroeconomic environment and the competitiveness of the business model.
• Causes of the Crisis: An analysis of the current company situation and the historical earnings, financial, and asset positions to identify the causes of the crisis and develop targeted restructuring measures.
• Restructuring Measures: A description of the target state of the restructured company, along with an explanation of the necessary measures, their implementation, and a quantification of the effects.
• Forecast Calculations: Based on the current situation and planned measures, a short-term liquidity plan (usually a direct liquidity plan for a period of 13 weeks and an indirect liquidity plan for a period of one year) and a long-term integrated plan (usually 3-5 years) are developed.

No-nonsense strategy with a focus on hard facts.

IDW S6 expert opinion

If the creditors include German institutions, an “IDW S6 expert opinion” is often required in restructuring situations. This is based on a standard developed by the Institute of Public Auditors in Germany (IDW) and is similar in content to the Austrian going concern prognosis. We can assist you in preparing a restructuring report according to IDW S6 standards.