A financial model is a key tool for quantitative evaluation of the investment attractiveness of companies and projects. Further, it is used to optimize capital structure, including public funds invested.

A financial model review conducted by EY enables the model’s developers and users to be confident in the accuracy of its financial calculations.

We test financial models using our ACE (“Analyze, Create, Enhance”) proprietary special-purpose tool. As such, we deliver independent confirmation to companies, lenders, investors, and state bodies that the model has been constructed appropriately in all material aspects, so as to achieve its objectives, and is free from material errors.

EY conducts detailed analysis of the logical integrity, arithmetic accuracy, and correct presentation of key project assumptions in the model, including consistency with financial, project, and tender documentation. EY experts review accounting and tax assumptions against applicable legislation. We also assess macros designed to optimize the financial model, eliminate circular references, and perform sensitivity analysis. Thus, our financial model review helps to detect significant computational errors made while the model is built, and to mitigate the risk of making poor investment decisions.

Financial model review: key steps

When is a financial model review needed?

Example 1. Compliance with bidding requirements

Bidders for PPP investment projects need their financial models to be verified against tender documentation requirements to make sure that they contain complete information, feature logical integrity and arithmetic accuracy, and are based on correct accounting, tax, and other assumptions.

Example 2. Finance raising

Finance providers need a review of potential borrowers’ financial models where project cash flows are the only source of debt repayment. This includes project finance, PPP projects, and regulated activities.

Example 3. Compliance with covenants

Regular reviews of a borrower’s financial model may be a loan agreement requirement.

EY financial modeling services: financial model reviews

• Preliminary discussion of the model with the client: objectives, assumptions, and calculations

• Analysis and review of the model’s structure • Detailed and step-by-step review of the

model’s logical integrity

• Comments on material errors• Communication with the model’s developers

when amending it• Comparison and checking of the updated model

(this may be an iterative process)

• Final version review • Validation of sensitivity analysis findings• Model review report

Model draft Comments

Final version of the model

Opinion letter

Benefits of our approach to financial model reviews• Special-purpose reports: A model review report prepared by EY may be attached

to an investment application or a bid, in order to show the company’s capacity to comply with loan agreement requirements or for other purposes.

• Experienced team: We offer financial model review services for projects across many industries and bring our clients teams made up of highly-qualified professionals with relevant expertise and deep knowledge.

►• Agility: Our model review processes allow us to meet tight deadlines while providing exceptional quality.

►• Proprietary tool for review: We have designed the ACE, an automated tool for technical reviews of financial models. Our tool allows us to detect inconsistencies in calculations, hidden changes in formulas, and manual entries in calculation sheets, as well as compare model versions to identify and describe changes by calculation blocks and prepare detailed reports on automated review findings, etc.

►• Focus on your needs: We place a particular emphasis on the needs of model users. For instance, we can confirm the accuracy of a grantor’s payment calculation under a PPP project in accordance with tender documentation or the concession agreement.

• Connectivity: We closely interact with our clients to ensure the smooth exchange of information, quality improvements to financial models, and the prompt issue of the opinion letter on the review findings.

EY’s financial model review projects — selected credentials

Development, reconstruction, and operation of an airport in the North-Western Federal District EY regularly reviewed the project model to assist the client with meeting loan covenants

Regional medical rehabilitation centerEY reviewed the financial model of a bidder, including its tax and accounting assumptions

Construction of a hospital in the North-Western Federal DistrictEY reviewed the financial model of a bidder, including its tax and accounting assumptions

Toll road (relief road) in MoscowEY reviewed the project financial model, including its tax assumptions

Highway bridge across the Lena RiverEY reviewed the financial model and financing plan of a bidder against tender documentation

Construction of a coal terminal at a sea port in the Far East Construction of medical centers in the Moscow region

Construction of a road in the Volga Federal District EY reviewed the project financial model of a bidder, including its tax and accounting assumptions

Construction of medical centers in the Moscow regionEY reviewed the financial model and tax and financial aspects of the concession agreements

Airport in the Southern Federal DistrictEY reviewed the project financial model for a potential investor

Development of the city parking system in the North-Western Federal DistrictEY reviewed the financial model and provided advisory services on financial, accounting, and tax issues

Contacts

Anna GusevaPartner, Transaction AdvisoryTel.: +7 (495) 641 2944Anna.Guseva@ru.ey.com

Sergey LuzanDirector, Transaction Advisory Tel.: +7 (495) 755 9700Sergey.Luzan@ru.ey.com

EY Assurance | Tax | Transactions | Advisory

About EYEY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

EY works together with companies across the CIS and assists them in realizing their business goals. 4,500 professionals work at 20 CIS offices (in Moscow, St. Petersburg, Novosibirsk, Ekaterinburg, Kazan, Krasnodar, Rostov-on-Don, Togliatti, Vladivostok, Yuzhno-Sakhalinsk, Almaty, Astana, Atyrau, Bishkek, Baku, Kyiv, Tashkent, Tbilisi, Yerevan and Minsk).

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.

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