Use of Transfer pricing or other alternative
I am working on a project for a Large Multinational Manufacturing company in Spain and we are currently in the design phase.
The project scope is to define a global template and gradually roll-out all group subsidiaries worldwide in a single client.
I have a doubt on whether it would be a value added for the project to implement Transfer Pricing + Material ledger (for parallel valuation) for intercompany margin elimination for consolidation or if it would be better to use other available alternatives to the transfer pricing solution.
The concrete business scenario is the following:
- The group has around 80 subsidiaries worldwide with significant intercompany flows.
- We are implementing a single SAP client where all companies will be rolled out in a 4-5 year time frame.
- Currently each site/country operates with local SAP systems or legacy systems.
- The company has currently an own developed application to perform Group Consolidation until Gross Margin per business line. Each subsidiary monthly uploads local P&L until Gross Margin at material level. The application has own-programmed rules to eliminate intercompany operations. The idea is to replace this application in the future with BPC.
- We are implementing COPA, but not activating PCA as the business line will be derived from material master attribute (e.g. Product Hierarchy). New GL will be activated and Profit Center field will be used if there is a legal requirement to have P&L and Balance Sheet at lower level than company code. Transfer prices (mark-ups) are not applied between business lines, only at company code level.
- We will be activating Material Ledger to achieve actual costing, but there might be cases where it is not activated and use standard valuation if the size of the company is not significant.
Having this in mind, I would like to know if it will be wise to implement Transfer pricing functionality and use ML parallel valuation to facilitate and obtain group intercompany movements elimination for the Group consolidation and if there are other alternatives in SAP that could be recommended.
It is clear that the current group consolidation application will remain the existing one (or BPC in the future) that has already a programmed logic to eliminate the intercompany margins, therefore, I have doubts to what extent embarking in the complexity of Transfer pricing and ML is a good idea. I hope you experts can give me some light into this.
Thanks in advance for your kind support.