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19 Comments
 

Generally, banks are not looking into accounting shenanigans. That's for auditors and accountants etc. Yes, banks will look into adjustments for extraordinary things and normalization, but they end up using management's case as a guide more than they care to admit. 

 
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Quality of Earnings Report (QoE), or Financial Due Diligence Report (produced by Accounting Firms - KPMG, E&Y, Deloitte, PWC).

OP - I may be able to help - I think I know what you're trying to say/find out. I see you're outside the US so the terminology is a bit different, but I've seen enough cross-border DD reports so I'll list both:

US - know as:

  • Financial Due Diligence Reports / Quality of Earnings Report / QoE

Outside of US know as a

  • "VDD Report" (Vender Due Diligence), or "Financial VDD Report" / "Red Flag Financial Due Diligence Report

I'll refer to this as a QoE from here on out. A QoE consists of typically these Adjustments in each section:

Adjustments

  • 1) Management Adjustments (Company provided adjustments)
  • 2) Normalizing Adjustments, or "Due Diligence Adjustments"(adjustments KPMG, or E&Y found)--consider these "Requirements" or very important to adjustment vs. "Recommendations" below
  • 3) Considerations / Recommendations
  • 4) Pro Forma Adjustments

Sections

  • 1) QoE - EBITDA add-backs
  • 2) Working Capital adjustments
  • 3) Debt and Debt-like items

These are typically confidential docs, a couple resources below that outline this stuff well from PWC and Deloitte

Source & Hyperlink - to learn more:

qoe

 

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