Forensic Accounting Services

Advisory Services: The Forensic Take

Reputation, regardless of numbers in the financial statements, is what keeps businesses afloat. Today, the newspapers are plagued with reports of companies facing a kaleidoscope of situations such as, hackers stealing important data; disputes among business partner, accusations of corruption by force sale of products by a company; accounting discrepancy; and unethical related party transactions, to name a few.

On the face of problems such as these, a sound explanation and a credible repair plan is imperative. This is where forensic accounting services come into play. It facilitates investigation; assessment and analysis of accounting statements, events, data and people; and providing a sound combat plan for the same. Each of the factors connected to the company are run by technical rules, and are also governed under multiple jurisdictions, and tackling the new amendments do not make in any easier. This is why, areas like corruption, cyber crime, intellectual property, litigation, regulatory investigations, licensing compliance, fraud, insurance claims, contract disputes and more are handled by expert specialists.

Why you Require Forensic Accounting Services

1. Need to do the right thing: Ignorance is never an excuse in the face of problems. When acquisitions are made, things need to be clarified to the press, public and most importantly in the courts of law. In such situations where proving your point is imperative, knowing the facts is essential. Professionals are trained to this end, and their specialized knowledge enables them to withstand the scrutiny of the regulators and courts. They are equipped to finding the right data and other supportive points to prove the state of things.

2. Complexity of being from overseas: Multinational companies face many overlapping complex laws, running through many countries; especially in new and emerging markets, the complexity of the situation is greater. Forensic accounting services include assimilating a team from within the local jurisdiction; these would include, subject experts, law enforcers, translators and other specialists. Such a team will be positioned in each market, to handle the situation at every interval.

3. Handle Data: In times of peril, an organizations’ data is a vital resource for fighting the case and letting the truth surface. However, in this age of competition, this valuable information is under threat of being stolen by prospective competition and organized crime rings. Forensic accounting services also include managing and protecting such restricted information.

Any situation needs timely remedy, and huge business problems are no different. If these experts are brought in during the initial stages, the chances are that it can save the organization from a lot of negative publicity, and at the same instance curtail costs and time.

Transfer Pricing, IFRS

Understanding the Basic Concepts of Transfer Pricing

When a company supplies good, renders services or finance to another related company, the pricing involved is called a transfer price. The concept of transfer pricing is an internationally accepted concept given by the International Financial Reporting Standards (IFRS). According to the concept, transactions among related parties, also known as associated enterprises, should be conducted on the same terms that would be used for unrelated parties. To this end, an arm’s length price is followed and Double Tax Avoidance agreements are entered into with the domestic tax authorities of various countries, which have adopted this principle.

Are Domestic Transactions Covered under this Principle?   
The principle is applicable to domestic transactions, only if the total amount transacted exceeds Rs 5 crore in a given financial year. These rules have been formulated under the Income Tax Act, 1961.

1. Any payment to which section 40A (2)(b) is applicable.
2. Any transaction with comes under section 80A
3. Any business deal with a person specified in 80-IA(10)
4. Any transaction with reference to Section 10AA, Chapter VI-A, to which 80(10) or 80(18) applies

How is the Arm’s Length Price Determined? 
The arm’s length price, which is given by IFRS, works in three steps. First, the transaction should be analyzed, which cover assets, functions and risk. Based on this, the most appropriate method of pricing should be determined and the method chosen should be applied to the transaction. These methods include,

1. Resale Price Method
2. Cost Plus Method
3. Profit Split Method
4. Transactional Net Margin Method
5. Comparable Uncontrolled Price Method

Is it Applicable to all Companies with International Transactions?
Corporate taxpayers, who have a total international transaction worth below Rs 1 crore, do not require maintaining pricing documentation. Although it is mandatory, substantial documentation on arm’s-length price of international transactions is advisable.

How can Financial Institutions Assist?
Financial Institutions have a specialized team of professionals, who assist in the various transfer pricing issues that a company faces. Here is a list of key areas that may be covered by the team.

1. Compliance: They assist in maintaining and preparing the necessary documents, doing economic and financial analysis for the company.
2. Planning: They also provide guidance when settling up policies.
3. Dispute resolution: The team conducts pricing audits. In case of a dispute, the team will assist in raising objections and appeals.  They also cover mutual agreements and advanced pricing agreements.
4. Restructurings: On account of changes in profits levels or turnover of international transactions, they provide economic justification for these changes, in order to correct the same.

Today, with the sheer volume of international transactions, a lot more companies are involved in the huge ocean that is transfer pricing.

Transfer Pricing, IFRS

Understanding the Basic Concepts of Transfer Pricing

When a company supplies good, renders services or finance to another related company, the pricing involved is called a transfer price. The concept of transfer pricing is an internationally accepted concept given by the International Financial Reporting Standards (IFRS). According to the concept, transactions among related parties, also known as associated enterprises, should be conducted on the same terms that would be used for unrelated parties. To this end, an arm’s length price is followed and Double Tax Avoidance agreements are entered into with the domestic tax authorities of various countries, which have adopted this principle.

Are Domestic Transactions Covered under this Principle? 

The principle is applicable to domestic transactions, only if the total amount transacted exceeds Rs 5 crore in a given financial year. These rules have been formulated under the Income Tax Act, 1961.

1. Any payment to which section 40A (2)(b) is applicable.
2. Any transaction with comes under section 80A
3. Any business deal with a person specified in 80-IA(10)
4. Any transaction with reference to Section 10AA, Chapter VI-A, to which 80(10) or 80(18) applies

How is the Arm’s Length Price Determined?

The arm’s length price, which is given by IFRS, works in three steps. First, the transaction should be analyzed, which cover assets, functions and risk. Based on this, the most appropriate method of pricing should be determined and the method chosen should be applied to the transaction. These methods include,

1. Resale Price Method
2. Cost Plus Method
3. Profit Split Method
4. Transactional Net Margin Method
5. Comparable Uncontrolled Price Method

Is it Applicable to all Companies with International Transactions?

Corporate taxpayers, who have a total international transaction worth below Rs 1 crore, do not require maintaining pricing documentation. Although it is mandatory, substantial documentation on arm’s-length price of international transactions is advisable.

How can Financial Institutions Assist?

Financial Institutions have a specialized team of professionals, who assist in the various transfer pricing issues that a company faces. Here is a list of key areas that may be covered by the team.

1. Compliance: They assist in maintaining and preparing the necessary documents, doing economic and financial analysis for the company.
2. Planning: They also provide guidance when settling up policies.
3. Dispute resolution: The team conducts pricing audits. In case of a dispute, the team will assist in raising objections and appeals.  They also cover mutual agreements and advanced pricing agreements.
4. Restructurings: On account of changes in profits levels or turnover of international transactions, they provide economic justification for these changes, in order to correct the same.

Today, with the sheer volume of international transactions, a lot more companies are involved in the huge ocean that is transfer pricing.

Supply Chain Management

Being a Supply Chain Manager

“A key to achieving success is to assemble a strong and stable management team.”

~VivekWadhwa, Entrepreneur

Supply chain managementbegins from product planning and goes on until the said product reaches the consumer’s hands. It covers all the stages that a product goes through, right from conception to reaching the end user, such as planning, procurement of raw materials, processing and manufacturing, warehousing, distributionand after sales services. As a supply chain manager, you must ensure that all this is executed with utmost precision, so that the company can achieve the highest possible profit out of product sales.

Job Description of a Supply Chain Manager

Here are some of the duties that a manager will be required to perform for efficient supply chain management:

1. Material sourcing and planning
2. Monitoring and auditing the supplies
3. Sourcing components
4. Establishing new suppliers
5. Monitoring and developing the existing supply chain for every product
6. Initiating cost saving methods
7. Negotiating and managing contracts.

Top 5 Qualities of a Good Supply Chain Manager

There are certain key skills that a manager must possess in order to produce results and promote good supply chain management.

1. Understanding Technology: Managers need to have a good pulse on what is happening on a daily basis within the business, especially in the consumer web, ensuring that the supply chain is being modified to suit the customers’ needs. This can help a business adapt and evolve ahead of the competition.

2. Follow from the Front: A manager is also required to remove all the roadblocks from the paths of employees in order to help them succeed and stick to the deadlines. In fact, itgoes beyond managing people, and actually aims atempowering and engaging workers.

3. Be an expert: You need to have answers to at least the majority of the questions. You need to keep the strategies fresh and need to know at least the basics of everything.

4. Trust: Micromanaging is a sign of very poor supply chain management. After you have laid the tasks to the various departmentsand also chalked out the expectations, trust them to do the said tasks effectively.

5. Communication: With so many aspects in the supply chain, a manager needs to be able to communicate effectively to make sure each process transitions without any hitches.

Asupply chain manager’s duties will begin right from procurement of raw materials to quality end products, delivered on time to the customers.

Transfer Pricing

Overcoming the Transfer Pricing Risk

Today’s business organisations are operating in a complex environment, filled with unprecedented uncertainty. The globalisation has brought in a huge volume of inter-company transactions, which have brought the onset of a number of regulations and law enforcements, making transfer pricing a major risk management concern for multinational businesses.

Like any other preceding issue, finance and audit companies have seized this opportunity to create a globally managed transfer pricing network, catering to global business operations. The objective here is to reduce the risk, using a strategic approach to support these pricing activities, thus resolving disputes efficiently.

Transfer Pricing Planning and Documentation

Global businesses are faced with both risk and opportunities, as they expand their volume of related party transactions and meet supply chain demands. This fuels the need for tax authority collaborations.

Strategic approaches and extensive documentation are a necessity to enable companies to achieve their tax planning objectives, both international and operational. A centralised global approach is necessary to facilitate uniformity andfor the elimination inconsistencies that may arise while a company caters to different supply markets. Hence, having a proper process in place forshielding a company’s financeis very important.

Dispute Avoidance and Advance Pricing Agreements

Transfer pricing leads to many operational and legal challenges, but most importantly it gives rise to a magnitude of taxation uncertainties, which include the potential of the management to carry out proper examination and implementation. For almost all businesses, such uncertainties are unacceptable business risks that need to be eliminated or reduced.

Advance pricing agreements enable the companies to enter into agreements with one or more tax authorities, well in advance. This helps them achieve a level of certainty, especially in areas of double taxation relief, etc.

Dispute Resolution

Missteps that are the outcome of transfer pricingbring in the tax authority enquires. The most effective and efficient defence mechanism for any company is to bring in the early involvement of an experienced team of specialists. The team should be able to carry out careful examinations through the advance pricing agreements, thus finally able to build administrative appeals, and lead litigation processes in any jurisdiction.

Business Model Optimization

The current economic scenario is pigeonholed by the racing technology upgrades, implementation of the best business practices and the numerous legislative changes. Business Model Optimization helps balancing the demands of both operations and tax laws, integrating them into one unit model.

This ensures that the tax planning does not curtail the company’s bottom line and also further helps sustain the business values.