Grifols | Intercompany service charges for transfer pricing

OUR CLIENT

Grifols S.A. is a multinational pharmaceutical company. It is European leader and largest world-wide producer of blood plasma-based products. The company also supplies devices, instruments and reagents for clinical testing laboratories.

BUSINESS CHALLENGES

Increasing regulation from tax authorities had put greater pressure on the Transfer Pricing department. Processes were supported by MS Excel models that required intensive manual intervention and were prone to error. Intercompany invoicing was based on budgeted figures as opposed to actuals, which resulted in ‘true up adjustments’. The business needed much greater transparency than was possible using spreadsheet models.  They also needed to release highly skilled people to value adding activities.

SOLUTION

Profit& developed a solution, using SAP PCM, that charges services between more than 50 legal entities using waterfall methodology. It is based on actual data and accurately allocates costs to services so that it reflects true consumption. Multiple reallocations are performed within Central Service entity first, so the full cost of service is calculated. Then cost is charged to legal entities with the applicable margin. The results are integrated with the invoicing process producing intercompany invoices automatically.

BENEFITS

The new solution has significantly reduced the time that it takes to run the intercompany service charge model each month. Process time has reduced from some days to just a few hours. This has allowed the transfer pricing team to spend more time analysing the results and providing transparent information to the business. It also enables the team to run ‘What if’ scenario’s on demand, so that the impact of changes can be analysed and used by the business as and when they need to. In addition, traceback of costs to their origins, provides the information needed to satisfy questions raised by the business and tax authorities.

“Profit& is helping us to automate our entire Transfer Pricing process. An intercompany service charge model is our first step on a transformational journey and Profit& are making it happen for us.”

Irene RocheSr. Director Transfer Pricing at Grifols

“The intercompany service charge model, implemented by Profit&, has provided an accurate view of how services are consumed by legal entities. This has improved our ability to satisfy increasing demands of the business and tax authorities.”

Irene RocheSenior Director Transfer Pricing at Grifols

In a snapshot

THE SOLUTION

Profit& delivered…

  • an improved intercompany service charge model using SAP PCM .
  • source data integration for improved accuracy & transparency of results.
  • integration with intercompany invoicing processes.
  • traceback of costs to origins.

THE BENEFITS

Griffols has an intercompany service charge model that gives…

  • accurate cost of service.
  • accurate recharges reflecting true consumption by legal entities.
  • the transfer pricing team more time to spend analysing results.
  • ‘what if scenarios’ on demand.
  • transparency of cost to ensure that transfer pricing model is accurate.