global transfer pricing conference · global transfer pricing conference │ october 2016 phase 1...

Global Transfer Pricing ConferenceData analytics and transformation

October 2016

www.pwc.com/transferpricing

The new normal – full TransParency

Global Transfer Pricing Conference │ October 2016

Today’s presenters

PwC │ 2

Brian T. Burt Laurent Bellay

David A. Nickson


Agenda

PwC │ 3

TP Analytics Overview1

Example Applications2

Case Study3

Q&A4


Transfer Pricing AnalyticsA new service offering…

1


HeadlinesData Analytics in the News

PwC │ 5

Data-informed.com

IRS Implements Analytics for Compliance,

Fraud Detection and Workforce Management

WASHINGTON—The U.S. Internal Revenue Service has launched

several data analytics projects that are improving compliance,

combating fraud, identifying abusive tax shelters and saving money,

according to several representatives of the federal tax collection

agency. The officials spoke at the Predictive Analytics World

Government Conference held here on Sept. 17 and 18.

Fighting tax fraud with big data

CNBC


Cross-Functional Solutions

PwC │ 6

• Enriches descriptive analytics to understand what has happened (reporting on key metrics)

• Improves predictive analytics to understand what is likely to happen (modeling and trend detection)

• Enhances prescriptive analytics (use of predictive models to determine the best course of action)

Corporate / Overall

• Enables operational and decision-making processes, in areas such as local adherence to TP policies, detection of risk, opportunity identification, projections and scenario planning, and overall business support

• Additional level of transparency benefits Client’s audit readiness and its ability to meet growing global tax information reporting requirements (e.g., country by country reporting)

• Allows for jurisdictional reporting and documentation of business activities, which is critical in managing increased tax controversies and disputes resulting from global transparency initiatives

• Multi-period trending and benchmarking using real-time data provide key insights into how the Tax function / TP policy is impacting the overall business

Tax / Transfer Pricing

• Improved forecasting / scenario planning, using historical, applying current or future data to obtain retrospective, current (real time) or prospective insights

• Leverage framework to analyze key indicators and perform due diligence for contemplated acquisitions (e.g., country by country SKU profitability / margin, tax implications, etc.), providing insight into how the acquisitions might be best integrated into Client’s global Commercial strategy

Commercial


Cross-Functional Solutions

PwC │ 7

Current state Leveraging data analytics & visualization

Data is manually gathered from disparate sources without the ability to analyze cohesively

Via Extract, Transform and Load (ETL) tools, data can be pulled automatically from source systems and stored centrally for efficient use

Excel is the predominant tool leveraged for storing, calculating and analyzing tax data, which can be effective, but oftentimes time consuming to maintain and review

Adding data and analytics solutions (e.g., SQL, Alteryx, PowerPivot) to the current Excel environment can augment the potential for automation (and reduction in time & level of effort)

Updating and reviewing calculations in complex Excel models can be time consuming and adds risk of error to the process

Data analytic tools (e.g., SQL, Alteryx, PowerPivot) can bolt on to existing Excel models or replace the use of Excel all together to increase the scalability of complex calculations (e.g., across legal entities, business units, consolidated groups) and mitigate overall risk via greater control

Results of tax calculations are highly aggregated and documented in static reports (e.g., PowerPoint, Word), requiring these deliverables to also be manually updated each time data is refreshed and minimizing end user functionality to dynamically interact with reported data

Visualization solutions (e.g., Tableau, MicroStrategy,Qlikview) are leveraged to bolt directly onto the calculation engine(s) (e.g., SQL, Alteryx, Excel) to create web and mobile-enabled, dynamic dashboards and provide enhanced data insights, enabling end users to efficiently make strategic business decisions


Sample Process Flow

PwC │ 8

Data AnalyticsApplications

2

Data AnalyticsClient example

3


Agenda

PwC │ 11

Company background / organizational set-up

Key issues to address

Process change - Phase 1 and 2

Where are we now?

Question & Answer


Organizational set-up - Transfer Pricing

PwC │ 12

• Corporate Taxation is responsible for developing Transfer Pricing policies

• The Legal Entity Transfer Pricing (LETP) team is responsible for administering those policies

− Efficiencies of a centralized team

− Calculations are performed on a monthly basis, one month in arrears

o true-ups occur continually each month

− Invoiced and settled monthly via intercompany accounts

− Legal entity controllers review the results and process associated journal entries and payments


What were the key issues to address?

PwC │ 13

• 14 independent excel based calculations with manual reconciliations

− data integrity – accuracy & completeness

• Data collection process into excel based models consumed more than 50% of monthly resource time

− sensitive to minor changes in accounting hierarchies

• Manual cross-model allocations

− consumed valuable review time on reconciliation rather than analytics

• Excessive time being spent on backwards analysis in response to tax authorities enquiries and audits

− extensive time to reproduce historical view of business segments and G/L account structure

• Key person risk

− incomplete executing documentation leading to concentration of knowledge with certain individuals in tax and accounting


Phase 1 Achieve automation – replicate reporting

PwC │ 14

Phase 1

Consolidated TP results

Relevant Information for

each Legal Entity

Reporting

package by

Legal

Entity

Financial Data Warehouse (FDW)

Integrity

Consistency

Completeness

Inputs

Mark ups, FX rates, Indirect

allocations, etc

Reduced and controlled

manual inputs

Process & Controls

Reconciliation

Validation

Sign-offs

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&uact=8&ved=0CAQQjRw&url=http://microsoftofficehelps.com/microsoft-support-page/about-the-microsoft-access-application-in-microsoft-office/attachment/access-logo/&ei=bxRhVMT8GrbIsATW1ILADQ&psig=AFQjCNEAnxntHq2D4DWBIZ2AeSdhdiifpA&ust=1415734767498764



Phase 2 - Enhance Data Analytics

PwC │ 15

Stakeholders:

Corporate Tax,

Legal Entity

Controllers

Ou

tpu

t

Dashboard

Reporting &

Analytics




Samples of BI software capabilities

PwC │ 16


Where are we now?

PwC │ 17

Phase 1 goal was achieving automation, gaining efficiencies, and replicating similar reporting format for local controllers

Phase 2 is taking advantage of the achievements realized through automation to build and enhance data analytics and reporting through a business intelligence tool such as Spotfire.

Lessons learned on reporting

Have the end goal in mind - understand reporting requirements and limitations

• Will facilitate the development and design process

Consider stakeholder requirements

• CbC reporting and other statutory audits

• Needs of corporate tax team, management and legal entity controllers


Panel Q&A

PwC │ 18


What did you think?

PwC │ 19

At the end of the session, tap Session Survey and provide your rating on any or all survey questions. Tap submit response.

This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the

information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the

accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PwC does not accept or assume any liability,

responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or

for any decision based on it.

© 2016 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see

www.pwc.com/structure for further details.

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