term project

ADEC752001 Transfer Pricing, 3 Woods College of Advancing Studies, Boston College Fall 2020 Semester, October 26 – December 13, 2020 Instructor: Antonio Saravia BC E-mail: [email protected] (best way to contact me) Phone: 404-625-2116 Office Hours: I am available every day during regular business hours for virtual sessions. Just sent me an e-mail to set up an appointment. Class Location: Online Class Meeting Time(s): This is an asynchronous class with just a few synchronous sessions. You will find the calendar in the course outline below. Term Project The term project will consist on preparing a transfer pricing documentation report that mimics an actual documentation report prepared by a consulting company for submission to the IRS. The term project will be written in six different stages during the first six weeks of the course. Students must submit their progress at the end of every week for feedback. Submission of the complete report will be due during the final week. Part 1. Due 10/30 by 8 pm EST (2 points) 1. Pick a public company to work with (we will call it A). You can use the database of public

companies at EDGAR at the US Securities and Exchange Commission: https://www.sec.gov/edgar/searchedgar/companysearch.html This is more difficult that it sounds. You would want to review 10Ks and choose a company that fulfills the following criteria.

a. It operates in an industry that you are familiar with or you want to learn more about. b. It performs at least one controlled distribution or service transaction with a subsidiary

or parent company in a different country or tax jurisdiction (we will call it B). The goal of the report is to assess the arm’s length principle in that controlled transaction.

c. The controlled transaction should be a simple distribution or service engagement for which the terms and responsibilities for both parties are clearly defined.

Part 2. Due 11/6 by 8 pm EST (2 points) 1. Describe the general type of business that A and B perform. [2 pages] 2. Describe the industries in which A and B operate. Are the industries competitive or do you see

them as an oligopoly or monopoly? [1 page] Part 3. Due 11/13 by 8 pm EST (2 points) 1. Describe the controlled transaction, establish the terms of the engagement between A and B,

and develop a graphical model of the combined production process. [2 pages]

2. Describe the functions, risks and assets controlled by each entity as they pertain to the controlled transaction. [2 pages]

Part 4. Due 11/20 by 8 pm EST (2 points) 1. Choose and justify a method to assess the arm’s length principle (in most cases that would be

the CPM). 2. Choose the tested party 3. Choose the profit level indicator [2 pages] Part 5. Due 12/4 by 8 pm EST (2 points) 1. Find comparable companies to the tested party to develop the interquartile range. The best way

to do this is by using Compustat. You can require a free demo. I will hold a Sync session to explain how to perform a search for comparable companies.

2. Assess whether the profit level for the tested party is within the interquartile range and whether any adjustments are needed. [2 pages]

Part 6. Due 12/9 by 8 pm EST (5 points) 1. Write your conclusions. Was the controlled transaction being performed following the arm’s

length principle? Should A or B allocate a reserve for extra tax payments? [1 page] 2. Submission of the complete report.