Transfer Pricing: The real story

So, After having worked in Transfer Pricing (TP) for nearly a year now, I thought it was time I posted a bit about working in Transfer Pricing, as it is an area I think that is very misunderstood.

I work in europe for a big 4 accounting firm in TP.

I think it is the belief of many people that TP involves doing compliance work, ie just filling in tax forms all day. this is VERY VERY wrong.

TP is really a fantastic area in my opinion, it is very varied and involves a lot of interesting work.

FIrstly, you learn a lot about a company, and that is the company as a whole, big large international companies, how tehy operate and their structuring. In pricing, it is very important to learn about the diferent functions and structures of the group, which is all very itneresting, you learn a lot about how they operate etc.

There is a lot of company research, to learn all of this about the company, interviews with finance departments, and other departments staff etc. Researching comparable companies and so on.

Then there is plenty of financial statement analysis, etc.

Just so people know the jist of TP, it is the pricing of contributions (goods, intangibles, services) and funds transferred between connected parties. Basically it covers all transactions that take place, but within a companies whole group.

Now the most interesting work is to do with planning. This is advising companies on structuring changes, shifting functions and risks to different locations. Such as moving Intellectual Property and changing models such as from full distributors to agents and having to value exit charges etc.

There is a lot of research in planning as well, putting together to models to see feasibility and outcomes etc of different structures.

THen there is a bit of valuation, valuing Intellectual Property such as technologies, customer lists, brand names, patents, etc. DCF models, market models, EVA and so on, all sorts of methods to justify valuations.

A typical TP day in the office could cover the following:
- undertaking a comparable company search. (this involves researching the company to know its functions and risks and looking for comparable companies)
- Attending client meetings
- drafting function analysis (this is a complete run down of the companys operations, risks, just a whole analysis of the comapny etc).
- Modelling work

Common exam routes for TP workers are either the CFA or Chartered Accountant.

So I just wanted everyone to know what TP involved, and not to rule it out as it is a very interesting area to work, and should have better exit opportunities then many think. But its sucha good job its worth staying on it for a career path. It certainly beats working audit for me, or some other finance department.

So take from it what you can.