EY’s ’07-’08 survey says. “as a result of developments in financial reporting, 44% of parent respondents have increased their reliance on their audit firm for transfer pricing advice.”
There’s no doubt that this is a growing and increasingly important field. However it seems inefficient to outsource this function to the consultancy. I have heard that, depending on how frequently a company needs studies done, the total tab for outsourcing can easily exceed the combined salary of a small department. Additionally, a series of studies will do nowhere near as much to add value to the company as a small, dedicated department will. This is certainly good for the consultancy business, but companies should really follow the lead of the innovators here (GE, Pfizer, Intel, EA, etc.) and bring the function in house instead of shoveling more money at the Big 4. It will dramatically increase their profitability.
Agree?
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2 comments:
I agree to Mike's comments. Also the fact that data security is a big concern for MNC's sounds a great idea. However not so good news for consultants though.
While that's certainly where I think the industry will end up, I believe it will be a long time before the bulk of Fortune 500 companies have their own transfer pricing departments. They aren't just looking at the cost of salaries, but the access to resources that the Big 4 have will take a long time to acquire. Not to mention that all 4 use proprietary transfer pricing software that is much better than anything publicly available.
An additional consideration is the fact that controversy assistance will be much more expensive to outsource when you don't have a firm with extensive existing knowledge about your company's TP practices.
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