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Internship report at TPA Horwath Poland

Table of ContentsI. My story...............................................................................................................................................3

II. Company Introduction- TPA Horwath – Your strong partner..............................................................4

1. TPA Horwath History.......................................................................................................................5

2. Philosophy.......................................................................................................................................6

3. TPA Horwath Poland........................................................................................................................8

a. Partners.......................................................................................................................................8

4. TPA Horwath Services......................................................................................................................9

a. Tax Advisory...............................................................................................................................10

b. Accounting.................................................................................................................................10

c. Audit..........................................................................................................................................11

d. Advisory.....................................................................................................................................12

5. Industries.......................................................................................................................................17

III. Mergers and Acquistions...............................................................................................................18

1. Poland: Accounting Standards: Limited liability company.............................................................19

2. Romania: Accounting Standards: Limited liability company..........................................................25

3. Project work..................................................................................................................................31

IV. Emerging Markets..........................................................................................................................31

1. Difference between a saturated market and an emerging market................................................33

a. Marketing Approach..................................................................................................................34

b. Brand Significance......................................................................................................................34

c. Competition...............................................................................................................................34

d. Opportunities.............................................................................................................................35

2. Clients or suppliers companies from emerging economies...........................................................35

a. The case of XY S.A. and TPA Horwath Sztuba Kaczmarek spo.z.o.o...........................................37

V. International Investments.................................................................................................................38

VI. International Finance.....................................................................................................................40

VII. International Taxation...................................................................................................................42

1. Proposed Tax Scheme....................................................................................................................42

VIII. International Marketing.................................................................................................................47

1. The marketing strategy to enter Poland: Franchising....................................................................48

IX. Financial Management and Controlling.........................................................................................57

X. Sources..............................................................................................................................................58

XI. Appendix........................................................................................................................................58

I. My story

Why TPA Horwath?

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

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 8th biggest consultancy company in the world,

or better said one if it’s “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 I’m 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. Company Introduction- TPA Horwath – Your strong partner

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 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.

1. TPA Horwath History

TPA (Treuhand Partner Austria) was founded in Langenlois, in Lower Austria in 1979. The tax

company grew rapidly and already in 1990 it employed around 65 members of staff.

Expansion of the tax and audit company

The expansion in the bordering countries in Central and South Eastern Europe began in the

1990s. In all of the new CEE/SEE countries (Albania, Bulgaria, Croatia (exclusive business

partner), Poland, Romania, Serbia, Slovakia, the Czech Republic and Hungary) in which TPA

Horwath is currently represented, the focus of the consulting activities is in the areas of real

estate, banking/leasing, energy, production and trade.

Foundation TPA - Treuhandpartner Austria, founded Langenlois tax advisory

Since 1995 TPA Horwath has been a member of Crowe Horwath International, a worldwide

association of legally independent tax consultants, auditors and advisory. This network has more

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. Pölten 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

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 know-

how 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.

3. TPA Horwath Poland

a. Partners

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 I’ve 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.

Małgorzata Dankowska Warsaw

Krzysztof Dziekoński Warsaw, Poznan

Krzysztof Horodko Warsaw, Poznan, Katowice

Krzysztof Kaczmarek Warsaw, Poznan

Damian Kubiś Warsaw, Poznan

Wojciech Sztuba Warsaw, Poznan

Dorota Trojanowska Warsaw, Poznan

Ewa Znamierowska Warsaw, Poznan

Małgorzata 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 ServicesMaximum 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

extent dependent on the quality of available information as well as the introduction of

appropriate posttransaction and restructuring measures.

Our tax & audit experts are active in 11 European countries: For more than 20 years we have

supported our clients locally in Albania, Austria, Bulgaria, Croatia, the Czech Republic,

Hungary, Poland, Romania, Serbia, Slovakia & Slovenia. We know the European markets and

their peculiarities. You benefit from the know-how of an entire group of companies. We advise

you in your language – the 'German & English Desks' at every

TPA Horwath office.

a. Tax AdvisoryStrength 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 „German-

English 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.

b. AccountingIt 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

Preparation of VAT advance returns

Processing of monetary transactions

Reporting

Dunning

Outsourcing of Accounting and Payroll Accounting with TPA Horwath

Our accounters help you to remain in full control of your finances, by taking over your

Accounting or Payroll Accounting for you. The outsourcing of these services has become

standard in many industry sections: Professional bookkeeping, maintenance of ledgers, cost

center and multiple currency accounting, cash management, payments, VAT returns,

management accounts and payroll management.

c. AuditTPA 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/US-

GAAP).

Additional Value through Optimisation.

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/US-

GAAP).

Our responsibility as auditor extends far beyond mere confirmation that annual financial

statements comply with legal regulations. It is our aim to create an „additional value audit“ for

our clients with recommendations to optimise business processes, internal control systems and

management information systems in every audit.

Together with our subsidiaries in neighbouring countries as well as the involvement in the Crowe

Horwath International network, we can offer our internationally active clients an efficiently

executed audit which is in accordance with the "International Standards on Auditing" (ISAs).

Our auditing services in Central and Middle East Europe:

Annual Audit

Bank Audits

Corporate Accounting

Corporate Governance & Compliance

Due Diligence (Financial)

Fraud Investigation & Forensic Audit

IFRS/US-GAAP Consultancy

Risk Management (Risk Controlling)

Special and prospectus due diligence

d. AdvisoryIn 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

CFO Consultancy and Interim Management

Controlling

Corporate Finance

Financial Due Diligence

Financial Restructuring

Merger / Acquisition

Organisation & IT

Risk Management & Compliance

Subsidy Advisory

Further on I’m 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

structure, time frame, exit, etc.

Alternatively, establishment of an expansion strategy for buy-side mandates and search

for suitable target companies

Development of an optimal transaction structure taking into consideration financial and

tax issues as well as value improving factors and accounting

Comprehensive analysis of companies and markets for optimal presentation in the

marketing documents

Verification of third party documents

Preparation and execution of the entire M&A process as well as assistance in preparing

major documents (support letter, LOI, binding offer, etc.)

Search and identification of potential buyers for sell-side mandates with market standard

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

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:

Identification of the primary risks (the deal-breakers)

EBITDA analysis in terms of cash flow projections

Operational activity analysis on the revenue and cost side

Review of balance sheet items and off balance sheet liabilities

Working capital analysis

Analysis of significant agreements concluded by the target The result is a report

highlighting particular areas constituting the subject of the audit together with a

summary of significant risks and a detailed list of financial information.

Tax due diligence

We provide a verification of the overall tax position as well as an analysis and assessment of

potential tax risks.

Tax due diligence 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

transactions as well as real estate tax

Identification of the primary risk areas pertaining to tax liabilities of the target, with

particular emphasis on their effect on the current financial situation and future financial

situation of the acquirer. Wherever possible we estimate initial values for the potential for

overdue tax liabilities relevant to the target.

Valuations

We have extensive knowledge and experience in performing valuations for companies,

institutions and investment funds.

Our services include:

Indicative and comprehensive valuations of enterprises

Valuation of intellectual property (trademarks, patents, etc.)

Financial modelling including assistance in making strategic decisions

Analysis of indebted and unprofitable entities‘ restructuring programmes together with

insolvency risk quantification

Valuations of the need for capital group restructuring

Valuations of non-public investment fund assets

Fairness opinions

Comprehensive calculation and allocation of business purchase price pursuant to IFRS,

including the price of identifiable assets of the acquired entity, liabilities and all non-

controlling shares in the acquired entity.

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 client‘s 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.

Status-quo analysis, short and medium term liquidity needs

(Strategic) Independent Business Review

Preparation and/or examination of re-organisation concepts

Analysis of crisis factors and proposals to improve performance

Plan scenarios with simulation models

Forecasts regarding continued operation of the company

Search for an investor to secure long-term continued business

Support in financing questions and bank negotiations

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:

Integration analysis and assessment for businesses subject to amerger

Integration of financial and accounting functions, including an unification of account

schedules, accounting policy, in-house executive procedures, tax procedures

Company management function and process integration including management and

control tools and IT systems

Unification of plans and budgets, developing a strategic business plan and a financial

model for the merged organisation

Post merger financial and operation efficiency monitoring.

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:

Banking, Insurance & Financial Service Provider

Biotechnology & Pharmaceutical Industry

Commerce and Mechanical Art

Construction Industry

Food Industry

Energy

Healthcare

High Net-Worth Individuals

Holdings

Hotel, Tourism & Leisure

Information Technology & Media

Laywers

Manufacturing Industry

Non-profit & Public Authorities

Real Estate

Transport & Logistics

Waste Industry

Winegrowing & Agriculture

III. Mergers and Acquistions

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 I’m 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.

Bondspot Securities Market.

Poland used the option under the IAS Regulation as follows:

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:

A company that has filed for admission for public trading

A subsidiary of a company that prepares consolidated financial statements in conformity

IFRS as adopted by the EU.

1. Poland: Accounting Standards: Limited liability company

(spolka z ograniczonaodpowiedzialnoscia , sp. z o.o. or spolka z o.o.)

General overview

Limited liability company is a capital company with a separate legal personality. The founders

(shareholders) of a company with limited liability may be natural persons, legal persons or

commercial companies. The minimum share capital which is necessary to form a company

amounts to 5 000 PLN or approximately €1,250.

The governing bodies of the company a re: Meeting of Shareholders, Management Board and

Supervisory board which is optional (every shareholder is allowed to review the Company’s

records at any time and to request necessary explanation from the Management), in case if share

capital exceeds 500 000 PLN or 125,000 EUR and number of shareholders exceeds 25, the

Superv isory board should be appointed.

The articles of association need to be formed as a notarial deed. The shareholders' personal assets

are not pledged for obligations of the company.

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;

trial balances of general and subsidiary ledger accounts;

a list of items of assets, liabilities and equity (inventory).

Subsidiary ledger accounts are kept in particular for:

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;

trade receivables and payables;

employee receivables and payables, in particular a remuneration record of

each individual employee which provides Information on the entire period of

employment;

sales transactions (sequentially numbered sales invoices and other documents,

with sufficient detail to meet tax requirements);

purchase transact ions (sequentially numbered purchase invoices and other

documents, with sufficient detail to measure the value of assets and meet tax

requirements);

costs and items of assets which are material to an entity;

cash transactions, if an entity possesses cash -box.

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;

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:

the adopted accounting principles (policies);

journal, based on the accounting documents, the books of accounts which

record the entries of the events in a chronological and systematic manner;

a periodic determination or verification, through a stocktakig, of actual

balances of assets, liabilities and equity;

measurement of assets, liabilities and equity, and determination of the

financial result;

preparation of financial statements;

gathering and storing accounting documents and other documentation required

by the Act;

having financial statements audited and published in cases required by the

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

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:

The historic cost and prudence principles are applied;

Assumption of the going concern;

Use of accruals and matching concepts;

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;

Certain investments in real estate and financial investments could be valued at

their fair value as of each balance sheet date;

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;

Provisions should be made for certain or probable future liabilities (being in

principle an obligation resulting from past events), when the amount can be

reliably estimated;

Consistency between accounting p eriods and full disclosure of changes in

accounting policy (Changes in the accounting assumptions are applied

retrospectively and require a disclosure in the notes to the financial

statements, of the impact of those changes on the financial statements of a ll

periods);

No offsetting is allowed.

Annual account and Financial statement

Financial Statements shall be prepared for the year ended and as of the date of closing the books,

by applying respectively the principles of valuation of assets and liabilities and establis hing

financial result.

Financial statements include:

balance sheet;

profit and loss account;

additional information including description of the accounting policies

applied, introduction to the financial statements, as well as supplementary

information and explanations.

Limited joint -stock partnerships, which financial statements shall be audited are obliged to

prepare the statement of changes in the entity’s 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 entity’s 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

description of threats. If it is material for assessment of the entity’s 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:

net turnover - no more than Polish currency equivalent of € 4,000,000;

total balance sheet assets at the end of the financial year - no more than Polish

currency equivalent of € 2,000,000;

average annual full -time employment - no more than 50 persons.

may prepare simplified financ ial statement, showing information illustrated in

the Attachment l to the Accounting Act.

Additional information shall be also prepared in a corresponding abridged form.

If the information of a particular financial statement items (lines) did not occur in both the

current and the prior financial year, such items shall be omitted when preparing the financial

statements.

Auditing/disclosure/publication

The annual financial statements of limited joint -stock partnerships shall be audited, when the

financial s tatements for preceding year for which the financial statement are prepared, fulfilled

at least two of the following conditions:

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;

average annual full -time employment attained or exceeded the level of 50

persons.

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

2. Romania: Accounting Standards: Limited liability company

(Societate cu raspundere limitata , SRL)

The OMF 1752 which is the the standard applicable to all the companies (not applicable to banks

and financial institutions) does not make direct reference to IFRSs but to the 4th and 7th EU

Directives.

The OMF 907 regarding the application of IFRSs refers to listed companies, credit institutions,

insurance companies, subsidiaries of groups applying IFRSs that are required to apply IFRS,

without mentioning about the preparation of the financial statements compliant with EU

Directives. OMF 1121 completes the OMF 907 through the statutory obligation to prepare

financial statements compliant with the EU Directives for all the companies in addition to the

preparation of the IFRS financial statements (either mandatory or optionally applied).

4.1. General overview

The obligations of a limited liability company are guaranteed by their registered capital and the

associates are liable only to the extent of their registered capital contribution; the minimum

registered capital is RON 200 and must be fully paid in on the date of incorporation.

1 http://ec.europa.eu/enterprise/policies/sme/business-environment/files/annexes_accounting_report_2011/poland_en.pdf

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:

Class 1 – Equity accounts

Class 2 – Non-current assets

Class 3 – Inventories and work in progress

Class 4 – Third party accounts

Class 5 – Treasury accounts

Class 6 – Expense accounts

Class 7 – Revenue accounts

Class 8 – Special accounts

Class 9 – Management accounts

The main ledgers to be maintained by entities applying double -entry accounting are:

The Journal Ledger – an accounting document where all economic and

financial operations are recorded chronologically.

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.

The Trial Balance, which should be prepared monthly based on the

movements and balances in the General Ledger.

Accounting principles

Annual financial statements must give a true and fair view of an entity’s 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:

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.

Consistency principle. Measurement methods and accounting principles should be

applied consistently from one accounting period to the next.

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.

Separation. The components of asset and liability items should be measured

separately.

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.

Annual accounts and Financial statements

Order 3055 prescribes the layout and terminology of items in the balance sheet and profit or loss

account and establishes a set of size criteria based on which entities are required to submit either

regular financial statements or simplified financial statements. These criteria are:

total assets: € 3,650,000;

net annual turnover: € 7,300,000 ;

average number of employees: 50.

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

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 entity’s 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 entity’s 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:

significant events occurring a fter the year end;

the entity's expected development;

research and development activities;

information on acquisition of own shares;

existence of branches of the entity;

use by the entity of financial instruments, if material relative to its assets, liabi

lities, financial position and profit or loss:

entity’s objectives and policies for financial risk management, including

hedging policy for each major type of

forecasted transaction for which hedge accounting is used, and

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

government is helping to grow a promising emerging-market economy. The ruling Civic

Platform Party will in all likelihood return to power (as the leading party in the country’s

governing coalition) following elections in 2015, enabling the government to continue its bid to

liberalize the economy, encourage foreign investment, and develop national infrastructure. With

that, structural reforms and government investment should accelerate, especially in the defense

and energy sectors, though perhaps not until next year.

2 http://ec.europa.eu/enterprise/policies/sme/business-environment/files/annexes_accounting_report_2011/romania_en.pdf

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

rate agreements are currently pricing in an 85% probability of 50 basis points of hikes in 2014,

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

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 wouldn’t 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

1. Difference between a saturated market and an emerging market

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

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,

5 http://www.emergingmarketsmonitor.com/market-strategy-market-aligns-our-rate-forecast-10-feb-2014

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, it’s apparent that

developed markets are not always safer than emerging ones.

When investing in foreign markets, it’s 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.

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

2. Clients or suppliers companies from emerging economies

The Romanian economy is one of the world’s fastest developing markets outside of Asia. As the

largest in south-eastern Europe and the second largest in CEE, Romania is characterised by a

rising GDP, high-growth and rapid investment. It’s a region that is rich in land and energy

resources, as well as being a strong manufacturing base with a low cost work force.

Geographically placed at a cross roads of the major EU, Commonwealth of Independent States

and Middle Eastern markets, doing business in Romania means being at the centre of three

important pan-European corridors. These have links with Europe from west-to-east and north-to-

south, while water transport not only comes inland via the Danube but also at the Black Sea via

Romania’s 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 region’s 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 country’s 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

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.

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 doesn’t apply only to partners, managers

and supervisors whose foreign language skills are outstanding.

6 http://emerging-europe.com/regional-opportunities/romania/romanian-economy-doing-business-in-romania-gdp/

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 didn’t

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.

Is it difficult to work with companies inemerging 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 I’m 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 company’s 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 it’s an LLC. Even though the Polish “branch” is not a result of FDI there’s a strong

collaboration and ongoing communication among the member countries of the TPA Horwath

Group.

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 I’ve

been part of their tax department mainly during my internship there it really proved that without

Polish language it’s 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 don’t 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 don’t

think that outsourcing would be an option for the company. In my opinion it hides more risks than

benefits.

VI. International Finance

Hedging against foreign currency exchange risk

Since among the hundreds of clients of TPA Horwath Poland there are companies from fairly all

over the world and since we are talking about a company providing services, namely advisory

services, the hedging technique used by the company against foreign currency is FX options.

Every international transaction across national boundaries exposes either the importer or the

exporter to foreign exchange risk. There are several common sources:

• Overseas sales operations

• Manufacturing facilities

• Outsourced development or support

• Customer relationships

• Supplier relationships

• Balance sheet conversions

• Changing competitive position in the economy.

In our case the hedging technique used against foreign currency exchange risk is using forward

contracts. Our business in conducted in several currencies the two most relevant ones covering

77% of all client relationship are 47% in PLN (polish Zlotych) and 30% in Euro, the rest covers

dollars, shekels other European currencies etc.

Forward contracts and forward window contracts are used to lock in exchange rates for a specific

future date, or for a range of dates. Forward contracts are often used as a tool to eliminate the

impact of adverse currency movements and protect profit margins by determining a forward rate

for the exchange.

Benefits

The risk of exchange rate fluctuations is mitigated

It increases the management’s control over the company’s cash-flows and profitability

The exchange rate used in budgeting is fixed ex ante

This product is suitable for your business if:

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

VII. International TaxationEven though our company is providing advisory services for local and international clients in

terms of taxation and CIT, since TPA Horwath Poland is an LLC established in Poland under

Polish law, its taxes are entirely due exclusively in Poland. The corporate incomes tax on such

entities is a flat rate of 19 % which put Poland in a very favourable light when it comes to CIT

rates at the EU level and as the chart below shows it’s below the EU average. In fact Poland has

the 4th most favourable CIT rate withing the borders of the EU.

1. Proposed Tax SchemeAs a proposed tax scheme I would recommend one of the Luxembourg holding schemes in order

to optimize company taxes.

Luxembourg holding scheme

Luxembourg : General considerations

Central position in the heart of Europe

Top level financial center

2nd in the World for domiciled funds (behind the United States)

Multi-cultural and expert workforce

Highly qualitative infrastructure and good logistical network

Supportive and welcoming authorities

Favorable tax environment

Economic, social and political stability ensuring a secure legal and tax framework

Luxembourg : a favorable tax environment

No withholding tax on royalties, interest & liquidation proceeds

No withholding tax on dividends paid to tax treaty corporation if 10% shareholding or

acquisition price > € 1.2m. and 12 months holding period

Maximum withholding tax on dividends : 15%

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 or minor taxation upon exit or refinancing strategy

No CFC rules

Access to EU Directives (Parents/Subsidiary, Interest/Royalties, and Merger Directives)

64 double tax treaties (latest treaties : Hong Kong, Bahrain, Qatar, ...)

Lowest VAT rate in the European Union (standard rate : 15%)

Ruling practice and stable law environment

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

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 “Société de Participations Financières” (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

the permanent establishment in Luxembourg of an EU Company within the meaning of

the parent subsidiary Directive or a corporation resident in a country which has agreed a

double taxation agreement (DTA) with Luxembourg.

Status of the subsidiary company

a corporation with its registered office in Luxembourg with unlimited liability to tax, or

7 http://www.luxembourgforfinance.com/sites/luxembourgforfinance/files/lff-brochure-soparfi.pdf

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

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%).

Extent of the investment

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.

Minmum period of ownership

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).

The deduction of expenses

Expenses related to an inter-corporate privilege investment (e.g. interest expenses) are

deductible only to the extent which they exceed the tax-free income generated from the

investment in a particular year.

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.

Special provisions apply in connection with distribution-related partial write-offs which

effectively result in the partial write-off being deductible, the related dividend being

liable to tax and the possibility that future appreciations may be realised tax-free.

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.

Net wealth tax

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

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:

the distributing company is resident with unlimited liability to tax;

the receiving company is resident with unlimited liability to tax or is a corporation

resident in an EU memember state to which Council Directive 90/435/EC applies, is the

permanent establishment of an European Company in Luxembourg within the meaning of

Council Directive 90/435/EC or a resident permanent establishment of a parent company

which is resident in a country with which Luxembourg has agreed a DTA;

the receiving company has held an investment in a SOPARFI or an undertaking exists to

so do for a period of at least one year. It is required that the said investment corresponds

to at least 10% of the company's capital or amount to a purchase price of 1,200 EUR.

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.

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

VIII. International Marketing

As the largest economy among countries that joined the European Union (EU) over the last

decade, Poland is attracting strong interest from investors around the globe. Its large and growing

number of middle-income consumers and the forthcoming wave of infrastructure investments

create new and enticing opportunities. The Polish government and the EU are

facilitating foreign investors through continued liberalisation of markets, privatisation of assets,

improvement of infrastructure, and investment incentive programmes. While the investment

prospects are attractive, decisions made now can have enduring consequences.

Inadequate market understanding or insufficient forward planning can blight a venture in years to

come. Commercial and operational issues, taxation, intellectual property, employee remuneration

8 http://www.lcg-luxembourg.com/Financial-Holding-Company-SOPA.478+M52087573ab0.0.html

and regulation all bring challenges in new markets and jurisdictions. Meanwhile, pricing,

innovation, supply chains and routes to market in one industry or sector may turn out to be quite

different in another9

1. The marketing strategy to enter Poland: Franchising

As we mentioned before the TPA Horwath Group, regardless as marketing themselves as “1

company 11 countries” there is only an existing strong cooperation between the companies

operating throughout the CEE, Albania and Serbia.

Each company in each country is separate entity established under national laws being subject to

corporate taxes, withholding taxes and other legal requirements in their very own country of

residence.

The first country of the TPA Horwath Groups expansion was Hungary in 1995. As I mentioned

before TPA Horwath Poland was established in 2005, which made the market much easier since

it was after Poland’s accession to the European Union.

The founders of the company and main shareholders back at the time were Wojciech Sztuba and

Krzysztof Kaczmarek, both professionals. From the combination of their names the officially

registered name of the company is TPA Horwath Sztuba Kaczmarek Sp.z.o.o.. The founders

have chosen the international marketing strategy of franchising to enter the Polish market.

Among their competitors at the time we could find Deloitte, Ernst&Young (now E&Y), KPMG,

PwC, Mazars and local players.

I would like to present the founders of the company and their professional profiles. First of all

Wojciech Sztuba has extensive experience in the field of tax and business advisory services

dedicated especially to companies in the construction industry and real estate as well as energy

sector. His specialties comprise among others in dedicated tax structures for foreign investment

funds, real estate acquisition and real estate taxation.

Wojciech is a lecturer in a number of specialized training programs, including those organized

by the Instytut Doskonalenia Wiedzy o Rynku Energii (Institute for Improvement of Energy

Market Knowledge), PWEA PTPiREE, IHK, Euroforum IRIP, ELSA and Energia i Środowisko

9 http://kpmg.de/docs/developing-market-entry-strategy-for-poland.pdf

(Energy and Environment). He is also a lecturer at the University of Economics in Poznań on

Postgraduate Taxation and Treasury Faculty. Co-author of commentaries on energy law in the

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 is an expert in tax proceeding and his professional

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 political risk

Low cost

Allows simultaneous expansion into different regions of the world

Well selected partners bring financial investment as well as managerial capabilities to the

operation.

Disadvantages of franchising to the franchisor:

Maintaining control over franchisee may be difficult

Conflicts with franchisee are likely, including legal disputes

Preserving franchisor's image in the foreign market may be challenging

Requires monitoring and evaluating performance of franchisees, and providing ongoing

assistance

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:

Appreciate and reconcile cultural differences.

Know when to tolerate contradictions and when to reject them.

Consult with diverse management teams to understand the implications of headquarters-

based 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.

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:

Tolerate ambiguity and integrate multiple perspectives. Companies that operate in

multiple international markets constantly encounter contradictions. Marketing strategies

that work in one country may be inappropriate in another.

Leaders must adopt a balancing act to ensure cultural differences don't lead to roadblocks.

Adopt an interdependent approach to decision-making.

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 Poland’s 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

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 Hofstede’s 6 dimensions.

10 TPA Horwath Group Carta

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

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 people´s self-

image 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 self-

esteem, 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 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.

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.

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

11 http://geert-hofstede.com/austria.html

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 people´s self-

image 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 self-

esteem, 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.

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

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. Financial Management and Controlling

Based on the company's activity, discuss at least 2 out of the 3 elements presented below.Make sure you present methods, principles or techniques used by the company and providedata 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.

12 http://geert-hofstede.com/poland.html

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.

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 social rate of time preference The opportunity cost of capital Weighted average method

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. NetPresent Value, Internal Rate of Return, Payback Period, Average Accounting Rate of Return,Profitability Index.13

2. Cost of Capital.

Practitioners typically are confronted with this situation: ‘‘I know how to value abusiness 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 markettheory, that expected return is a function of market risk, still holds when dealingwith cost of equity capital in a global environment.Estimating a proper cost of capital in developed countries, where a relativeabundance of market data and comparable companies exists, requires a highdegree of expertise. Estimating cost of capital in less-developed (i.e.“emerging”) countries can present an even greater challenge, primarily due tolack of data (or poor data quality) and the potential for magnified financial,economic, and political risks. A good understanding of cost of capital conceptsis, therefore, essential information for executives making global investmentdecisions.

Cost of Different Sources of Capital, e.g. Cost of Debt, Cost of Preferred Stock, Costof Common Equity3. Working Capital Management, e.g.Managing and Measuring Liquidity.Investing Short Term Funds: Short term investing instruments, Strategies.

13 http://publicspendingcode.per.gov.ie/overview-of-appraisal-methods-and-techniques/

Managing Accounts Receivable.Managing Accounts Payable.Managing Short Term Financing, e.g. Sources of short term financing, Asset-basedloans, Computing the cost of borrowingNote! When answering the questions for each

X. Sources

XI. Appendix

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horwath services9a

tpa horwwath poland

austrian hr of tpa horwath

brands tpa horwath austria

international taxation421

international finance40vii

international marketing471

international investments38vi

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