Cannabis Accounting, Tax & Business Advisory Services

Going Public

Many cannabis companies go public as emerging growth companies and must assess management controls under SOX 404(a). However, we have seen our cannabis clients’ market cap increase rapidly to a size where management and the external auditor are required to assess all internal controls over financial reporting (under SOX 404(b)).

We recognize you have a business to run, so our methodology focuses on delivering what matters in a cost-efficient, turn-key manner. Scaling your SOX program is critical. We work with our clients to create solutions that are risk-based and practical to not only comply with standards, but also provide sustainability in core business processes as your company grows.

Optimizing Deductions

Section 280E currently limits the amount of federal credits cannabis clients can utilize. However, depending upon the state tax laws and your legal entity structure as a “plant-touching” company, you pay plenty of tax. Therefore, you should consider applicable credits and other incentives where beneficial.

We help clients identify missed credits and establish advantageous methods of accounting for optimizing deductions. Our team of specialists help clients realize the following value-add opportunities:

• Cost Segregation Plus Studies
• Employee Retention Credits
• Energy-Efficient Commercial Buildings §179D
• Fixed Asset Review Analysis/TPR
• Meals & Entertainment Study
• Research & Development Credit

Leverage Data to Achieve Efficiency

We have seen it. As cannabis companies grow organically and through acquisition, significant efforts are needed to drive operating efficiencies. Our Cannabis Advisory practice helps clients leverage data to achieve efficiencies from cultivation to dispensaries. Certain technology providers will not engage with plant-touching entities. Nevertheless, the technology environment continues to mature and offer products better suited for mid- and large-cap cannabis companies. At Cherry Bekaert, we believe digitally enabled organizations can better predict, innovate, perform and compete, and we tailor our solutions for the strategies deployed in plant-touching companies.

Accounting for Multiple Revenues

Transactions are abundant in the cannabis space, and more are imminent. Most cannabis companies are being valued based on multiples of revenue rather than a more traditional valuation method, multiple of EBITDA. Revenue multiples vary widely based on the state and vertical in which the company operates. While there is some movement underway to begin to utilize EBITDA multiples in assessing underlying value, the valuation focus remains on revenue and top-line growth.

Our team continues to assist Canadian and U.S. registrants who have International Financial Reporting Standards (IFRS) and U.S. Generally Accepted Accounting Principles (GAAP) reporting needs. While plant-touching valuations are similar in many ways to any business, industry factors must be considered, such as cost of capital in the industry, Section 280E tax impacts, significant regulations, rapid industry changes and cash flow projection uncertainties.

Other Cannabis Accounting, Tax & Advisory Services

We offer a full spectrum of cannabis accounting, financial and consulting services that provide cannabis and hemp businesses the insight they need to grow and succeed.

Advisory

• Audit Readiness & Execution
• Business Intelligence & Data Analytics
• Cybersecurity
• Deal Advisory
• Digital Transformation
• Entrepreneurial Services
• IFRS & U.S. GAAP Conversion
• IPO Readiness – U.S. and Canada
• Revenue Recognition
• Risk Advisory
• SOC Reporting Services
• Valuation

Tax

• Corporate Tax Planning & Structuring
• Energy Tax Credits & Incentives
• International Tax
• IRS and State Tax Audit Support
• Outsourced Accounting
• Section 280E Compliance
• State & Local Tax Compliance
• State Credits & Incentives