SlideShare a Scribd company logo
1 of 11
Download to read offline
«Company» Transfer Pricing

Transaction Module 3.X

IT Products &
Services
2008
IT Products & Services
TP Module 2008

Table of Contents
1
2

Introduction and Executive Summary ............................................................... 3
Scope and Abbreviations.................................................................................. 3
2.1
2.2

3

Transactional Analysis ..................................................................................... 4
3.1
3.2
3.3
3.4
3.4.1
3.4.2
3.4.3
3.4.4

3.5
3.5.1
3.5.2
3.5.3
3.5.4
3.5.5

4

Purpose and Scope ............................................................................................................ 3
Abbreviations ...................................................................................................................... 3
Introduction to the Transactions ......................................................................................... 4
«Company»’s IT organization ............................................................................................. 4
The ICT Steering Committee .............................................................................................. 5
Functional Analysis............................................................................................................. 5
Introduction ................................................................................................................................................... 5
Functions ...................................................................................................................................................... 5
Risks............................................................................................................................................................. 7
Assets........................................................................................................................................................... 7

Transfer Pricing Principles and Methodology ..................................................................... 7
Choice of transfer pricing method for the fixed price services provided by the IT Department ....................... 7
Applying the Cost-plus method – cost base .................................................................................................. 7
Applying the Cost-plus method – mark up ..................................................................................................... 8
Allocation of the cost base to the various services rendered by the three units ............................................. 8
Conclusion .................................................................................................................................................. 10

Appendix ........................................................................................................ 11
4.1

Appendix I - Typical cost base of services provided ........................................................ 11

TP Documentation 2008

2
IT Products & Services
TP Module 2008

1

Introduction and Executive Summary
The purpose of this module is to give an overview of intra-group IT products and services
transactions within the «Company» Group. The module will describe the covered
transactions and describe the involved parties` respective contributions to the transactions.
Furthermore the module will provide a description on how the intra-group prices are
determined and a comparability analysis defending the prices charged for the transactions.

2
2.1

Scope and Abbreviations
Purpose and Scope
The present module pertains to the following categories of intra-group IT products &
services transactions within the «Company» Group of companies:
ERP (Enterprise Resource Planning system (SAP))
Portal services
PC workstations
Telephony
Infrastructure services
Application management services
This module analyses and documents the service providers’ functions in relation to the IT
products & services supplied and the cost plus methodology applied in determining the
arm’s length fee payable by the service recipients.
The module pertains to the fiscal year 2008.

2.2

Abbreviations
The following abbreviations and acronyms are applied in this module:
Abbreviation
IT
ITK
ITC
ITD
SLA
ICT
SAP
ERP
CIO
BU
TC
PG
MARCO
Servicedesk

Explanation
The entire IT & Process Innovation Department of «Company»
The Customer Service Center, a unit within IT & Process
Corporate IT services, a unit within IT & Process
IT Infrastructure and Workplace Services, a unit within IT & Process
Service Level Agreement, an agreement between two parties to supply and
receive services at a pre-determined quality and cost
Information and Communications technology
Provider of ERP software, as well as the name of the ERP system in use by
«Company»
Enterprise Resource Planning. ERP systems can have functionality for
accounting, procurement and logistics, etc
Chief Information Officer, the head of the IT & Process Department
Business Unit within «Company»
Trading and continental operations, a business unit
Power generation, a business unit
The system in which «Company» tracks and monitors risk
A function with IT, also known as Helpdesk. However, it is also an IT system in

TP Documentation 2008

3
IT Products & Services
TP Module 2008

Abbreviation

3
3.1

Explanation
which this particular function manages its work.

Transactional Analysis
Introduction to the Transactions
«Company» has established a centralized IT and Process Innovation department (IT) in
«Company» AS in order to provide standardized IT services to the «Company» Group.
The main objective is to ensure that the «Company»group has well functioning and
competitive IT solutions and services to support the core business processes in the Group.
The contractual basis for providing IT services is a Service Level Agreement which is
entered into between «Company» AS and the various Group companies.

3.2

«Company»’s IT organization
The IT and Process Innovation department is organized as follows:

TP Documentation 2008

4
IT Products & Services
TP Module 2008

The organizational units within the IT and Process and Innovation department which
provide these services covered in this module are:
ITD – IT infrastructure and workplace services
ITC – Corporate IT services
ITK – Customer service center
The description of the IT organization will therefore be limited to these three units, the units
inside the red frame above.
These three units are staffed with about 40 specialized IT personnel, both full time
employees and consultants. There is no duplication of functions performed between IT
and departments / personnel in other Group companies.
Please note that the service rendered from the other units shown above, are priced based
on hourly rates or distributed aspart of the Intra Group Services. Please refer to the
relevant transaction modules for the pricing methods. For an overall description of the IT
department, please refer to the legal entity description of «Company» AS.

3.3

The ICT Steering Committee
The ICT steering committee is chaired by the head of the IT department and consists of
representatives from the Groups main operating units and members of the IT management
team.
The committee, which has no formal power, is used by the IT management team for the
purpose of strengthening, communicating and obtaining feedback on strategic directions as
well as for certain operational issues experienced by the customers.
As such, with regards to products and services and their pricing, the committee is
presented with an overview of said items. Feedback from the committee is typically
reflected before implementation.

3.4
3.4.1

Functional Analysis
Introduction
The purpose of the Functional Analysis is to identify the characteristics of the functions
performed, risks carried and assets applied related to the transactions.

3.4.2

Functions
3.4.2.1

Description of functions performed by ITD

ITD provides the operational, maintenance and support functions for the following
ITinfrastructure and telephony services:
Operation and availability of processing power (servers)
Storage, including operation of databases and backup/restore functionality
Telecommunications, network and telephony services
Monitoring of all IT infrastructure services to prevent downtime of data and
information exchange
Platform for integration of data between different corporate systems

TP Documentation 2008

5
IT Products & Services
TP Module 2008

3.4.2.2

Description of functions performed by ITC

The ITC unit performs the operational, maintenance and support functions for the following
services:
ERP services(i.e. SAP)
Provides access to the different modules of the Enterprise Resource Planning system SAP
used by the «Company» group (Finance, HR, Procurement/Logistics). Access gives the
user the ability to perform transactions and extract reports based on user privileges.
Portal services (The portal, i.e. the intranet solution)
Gives the user access to various services on the intranet solution used by the «Company»
Group such as: News and information, Archiving solutions, Recording worked hours etc.,
Various reports (finance, HR, etc), Travel expense reports, Procurement, Dictionaries,
Access to software, Your employment contract and salary information, HR information,
«Company»’s governance system.
Application management services
Operation, maintenance, and further enhancements/development of the following business
solutions:





Tridon
Maintenance Job Tech
Interface Job Tech/SAP
Cash Management module

3.4.2.3

Description of functions performed by ITK

The ITK unit performs the following functions:
PC workstations
The users can choose between the following categories of workstations:
Stationary
Portable
Thin client
Mobile
The service includes access to e-mail and standard office software such as Microsoft
Office. Included are safety measures such as anti-virus and firewall to mention a few. The
PC is owned by «Company» AS.
In addition, the following services are included in the price of a workstation:
Service Desk
The service desk typically handles the following requests from users:
Error situations experienced using IT systems and hardware
Ordering new services
Requests for changes to IT systems and user access
The service desk either handles the requests themselves or passes it on to experts with
specialized knowledge, in order to handle error situations, with IT systems or hardware.

TP Documentation 2008

6
IT Products & Services
TP Module 2008

User management
This is part of the service desk responsibilities. User management starts when a new
employee starts his or her work. The service desk establishes the user in the IT systems
with the privileges determined at the time. It also deals with changes to user access and
privileges, as well as deletion of users at the time of employment termination.

3.4.3

Risks
The IT department has a significant responsibility in order to manage and mitigate risks
incurred by providing IT services.
However, the Service Level Agreements with the customers (the other companies within
the Group) eliminate/reduce the finance risk related to the supply of the services mentioned
above. The Service Level Agreements do not penalize the IT organization financially if a
potential threat should be inflicted upon one or more of our customers due to failing IT
services.
Hence, the operational risk is not priced into our services. Risks are managed through a
separate process with the help of an IT system called MARCO. There are also financial
risks on the cost side of providing services to our customers, however, these risks are
always there, and in fact given the fact that our prices are cost-based, we do have an
option to adjust prices (up, or down) to reflect a changed cost base over the year.
However, this will always be presented to the ICT Steering Committee in advance.

3.4.4

Assets
To provide the services mentioned under ITC, ITK and ITD, the following assets are used:
Personnel
Office facilities and related infrastructure
Hardware (servers, network equipment)
Office equipment
Software and licenses
Know-how (IT understands «Company» business processes)
All assets are owned and operated by «Company» AS the company IT & Process is part
of.

3.5
3.5.1

Transfer Pricing Principles and Methodology
Choice of transfer pricing method for the fixed price services provided by the IT
Department
To determine the arm’s length price of the services mentioned under chapter 3.4.2 above,
the IT Department has applied the Cost-plus method. Please refer to the Masterfile for a
description and the reasons for selecting this method.

3.5.2

Applying the Cost-plus method – cost base
The cost-base used for the pricing of the services consists of the unit’s total wages and
salaries, in addition to standard personnel related costs such as training, mobile phone
usage etc. Additionally, product service related costs such as license/hardware
maintenance fees and communication costs are included as well asdepreciation expenses
related to IT projectsand hardware purchases.

TP Documentation 2008

7
IT Products & Services
TP Module 2008

These costs are tracked against the various services performed and represent the cost
base for each service.
3.5.3

Applying the Cost-plus method – mark up
Due to the limited riskon the provider side, see chapter3.4.3 above, and the fact that the
major part of the cost base consists of external costs, a markup of 3% is applied on the
cost base in order to determine the arm’s length price of the various services rendered by
the IT department to other group companies.

3.5.4

Allocation of the costbaseto the various services rendered by the three units
Please see the flowchart that follows in chapter 3.5.4.4 below.
3.5.4.1

Provided by ITD
The cost base of ITD is distributed based on the number of servers used in
support of thefollowing services described in this document:
Telephony services
ERP services
Portal services
Services for various applications
PC workstation services
The cost base pr user of telephony services is then established by dividing the
cost baseof Telephony services by the number of telephony users.

3.5.4.2

Provided by ITC
The cost base of ITCincluding the infrastructure cost transferred from ITD is
distributed based on the personnel resources used to run each service.
For ERP and Portal services, the cost base pr user is calculated based on the
total cost divided by the registered users of each service.
For the application services, the cost base for each application service is the total
cost allocated to the application.

3.5.4.3

Provided by ITK
The cost base of ITKand the infrastructure cost transferred from ITD is distributed
to the various PC workstation categories.
The cost base of each PC Workstation category is determined based on the
depreciation cost of each category of PCs and onthe number of personnel
resources needed to run and maintain the service.
The cost base pr user of each PC workstation category is then determined by
dividing the cost base by the registered users of each PC workstation category.

Within«Company» AS the cost of the various services are transferred to the users with no
mark-up. A mark-up of 3% is added to the invoicing of the services to users in other Group
companies.

TP Documentation 2008

8
IT Products & Services
TP Module 2008

The cost/prices are presented to the ICT Steering Committee in the beginning of the year,
and cost transfers/invoicing takes place on a monthly basis. The invoicing is based on
signed agreements with the relevant Group companies in «Company».

3.5.4.4

Flowchart showing interactions between IT units in delivering services to
customers

TP Documentation 2008

9
IT Products & Services
TP Module 2008

3.5.5

Conclusion
In the opinion of «Company» AS, the above cost-base and mark-up used demonstrates
that the fixed prices of the IT services rendered within the «Company» Group are in
compliance with the arm’s length principle.

TP Documentation 2008

10
IT Products & Services
TP Module 2007 - Appendix

4
4.1

Appendix
Appendix I - Typical cost base of services provided
Most services use a larger or smaller part of the typical operational expense cost items of
the budgets of the service provider units ITC, ITK and ITD.
Cost item
Wages and salaries (including corresponding social costs)
Depreciation expense
Freight costs
Electricity
Housing rent and other related expense (security, snow clearing,
etc)
Software licenses and maintenance costs
Repair and maintenance of hardware
IT consulting services
Office supplies
IT hardware components
Mobile phones
Magazines and newspapers
Training for employees
Telephone (including mobile phones) and fax
Communication costs (ADSL, LAN, WAN, etc)
Travel expense including lodging and food
Meetings and seminars including entertainment expense
Advertizing
Expensed project costs
Office services
IT services
Purchase of personnel from other parts of the «Company» Group

TP Documentation 2008

11

More Related Content

Viewers also liked

Digitacion periodo 2
Digitacion periodo 2Digitacion periodo 2
Digitacion periodo 2IETI SD
 
Como Hacer un Base de Datos
Como Hacer un Base de DatosComo Hacer un Base de Datos
Como Hacer un Base de Datosyaisleth96
 
Roheline printimine
Roheline printimineRoheline printimine
Roheline printimineliisaly
 
Formation sécurité routière sensibilisation collective
Formation sécurité routière sensibilisation collectiveFormation sécurité routière sensibilisation collective
Formation sécurité routière sensibilisation collectivePASCOL
 
Individual sections development_exercise__1
Individual sections development_exercise__1Individual sections development_exercise__1
Individual sections development_exercise__1lazystudent
 
Diplôme de l'Ecole-club Migros: 7 caractéristiques
Diplôme de l'Ecole-club Migros: 7 caractéristiques Diplôme de l'Ecole-club Migros: 7 caractéristiques
Diplôme de l'Ecole-club Migros: 7 caractéristiques Klubschule Migros
 
EFSLI in brief january 2014
EFSLI in brief january 2014EFSLI in brief january 2014
EFSLI in brief january 2014SILSE Madrid
 
Foto Nebot
Foto NebotFoto Nebot
Foto Nebotpavireco
 
Escenario innovacion colectiva
Escenario innovacion colectivaEscenario innovacion colectiva
Escenario innovacion colectivaOpenbasque
 
Revista: Desde la tradición
Revista: Desde la tradiciónRevista: Desde la tradición
Revista: Desde la tradiciónShukDelMadrij
 
Tratamiento Hipertermia Maligna
Tratamiento Hipertermia MalignaTratamiento Hipertermia Maligna
Tratamiento Hipertermia Malignatriayvt
 
Multi Cover and Resume
Multi Cover and ResumeMulti Cover and Resume
Multi Cover and ResumeVickie Lambert
 
20160113_Infoday TIC-ESP-TRA-Javier Medina
20160113_Infoday TIC-ESP-TRA-Javier Medina20160113_Infoday TIC-ESP-TRA-Javier Medina
20160113_Infoday TIC-ESP-TRA-Javier MedinaRedit
 
Pardot Elevate 2012 - Best Basic Practices for Drip Nurturing
Pardot Elevate 2012 - Best Basic Practices for Drip NurturingPardot Elevate 2012 - Best Basic Practices for Drip Nurturing
Pardot Elevate 2012 - Best Basic Practices for Drip NurturingPardot
 
Len Reimer At SFU June 2008
Len Reimer At SFU June 2008Len Reimer At SFU June 2008
Len Reimer At SFU June 2008guest40143e
 
X1177 filtro de-particulas
X1177 filtro de-particulasX1177 filtro de-particulas
X1177 filtro de-particulasJUANLEONE
 

Viewers also liked (20)

Haider Ruf Oktober 2009
Haider Ruf Oktober 2009Haider Ruf Oktober 2009
Haider Ruf Oktober 2009
 
Digitacion periodo 2
Digitacion periodo 2Digitacion periodo 2
Digitacion periodo 2
 
Como Hacer un Base de Datos
Como Hacer un Base de DatosComo Hacer un Base de Datos
Como Hacer un Base de Datos
 
Roheline printimine
Roheline printimineRoheline printimine
Roheline printimine
 
Formation sécurité routière sensibilisation collective
Formation sécurité routière sensibilisation collectiveFormation sécurité routière sensibilisation collective
Formation sécurité routière sensibilisation collective
 
Individual sections development_exercise__1
Individual sections development_exercise__1Individual sections development_exercise__1
Individual sections development_exercise__1
 
Diplôme de l'Ecole-club Migros: 7 caractéristiques
Diplôme de l'Ecole-club Migros: 7 caractéristiques Diplôme de l'Ecole-club Migros: 7 caractéristiques
Diplôme de l'Ecole-club Migros: 7 caractéristiques
 
Asturies y cantabria dragui
Asturies y cantabria draguiAsturies y cantabria dragui
Asturies y cantabria dragui
 
EFSLI in brief january 2014
EFSLI in brief january 2014EFSLI in brief january 2014
EFSLI in brief january 2014
 
Foto Nebot
Foto NebotFoto Nebot
Foto Nebot
 
Escenario innovacion colectiva
Escenario innovacion colectivaEscenario innovacion colectiva
Escenario innovacion colectiva
 
Uso de flamintex
Uso de flamintexUso de flamintex
Uso de flamintex
 
PLAYAS DE CÁDIZ
PLAYAS DE CÁDIZPLAYAS DE CÁDIZ
PLAYAS DE CÁDIZ
 
Revista: Desde la tradición
Revista: Desde la tradiciónRevista: Desde la tradición
Revista: Desde la tradición
 
Tratamiento Hipertermia Maligna
Tratamiento Hipertermia MalignaTratamiento Hipertermia Maligna
Tratamiento Hipertermia Maligna
 
Multi Cover and Resume
Multi Cover and ResumeMulti Cover and Resume
Multi Cover and Resume
 
20160113_Infoday TIC-ESP-TRA-Javier Medina
20160113_Infoday TIC-ESP-TRA-Javier Medina20160113_Infoday TIC-ESP-TRA-Javier Medina
20160113_Infoday TIC-ESP-TRA-Javier Medina
 
Pardot Elevate 2012 - Best Basic Practices for Drip Nurturing
Pardot Elevate 2012 - Best Basic Practices for Drip NurturingPardot Elevate 2012 - Best Basic Practices for Drip Nurturing
Pardot Elevate 2012 - Best Basic Practices for Drip Nurturing
 
Len Reimer At SFU June 2008
Len Reimer At SFU June 2008Len Reimer At SFU June 2008
Len Reimer At SFU June 2008
 
X1177 filtro de-particulas
X1177 filtro de-particulasX1177 filtro de-particulas
X1177 filtro de-particulas
 

Similar to Transfer pricing documentation for tax purposes of IT services for an internal IT service provider

Roger l brathwaite_cover_letter_it_2020
Roger l brathwaite_cover_letter_it_2020Roger l brathwaite_cover_letter_it_2020
Roger l brathwaite_cover_letter_it_2020Accenture
 
Sap tr um_dm_meter reading entry screen_v1.0
Sap tr um_dm_meter reading entry screen_v1.0Sap tr um_dm_meter reading entry screen_v1.0
Sap tr um_dm_meter reading entry screen_v1.0UF Technology
 
(ONLINE) ITIL Indonesia Community – Meetup “Modern IT Service Management Tran...
(ONLINE) ITIL Indonesia Community – Meetup “Modern IT Service Management Tran...(ONLINE) ITIL Indonesia Community – Meetup “Modern IT Service Management Tran...
(ONLINE) ITIL Indonesia Community – Meetup “Modern IT Service Management Tran...ITIL Indonesia
 
Sap tr um_dm_meter reading order reversal_v1.0
Sap tr um_dm_meter reading order reversal_v1.0Sap tr um_dm_meter reading order reversal_v1.0
Sap tr um_dm_meter reading order reversal_v1.0UF Technology
 
IT Service Management System Measurement using ISO20000-1 and ISO15504-8: De...
IT Service Management System Measurement using  ISO20000-1 and ISO15504-8: De...IT Service Management System Measurement using  ISO20000-1 and ISO15504-8: De...
IT Service Management System Measurement using ISO20000-1 and ISO15504-8: De...IJECEIAES
 
Domestic Data Entry Operator.pdf
Domestic Data Entry Operator.pdfDomestic Data Entry Operator.pdf
Domestic Data Entry Operator.pdfJaspreetKaur612789
 
Multimodal IT and Orchestration for Digital Transformation
Multimodal IT and Orchestration for Digital TransformationMultimodal IT and Orchestration for Digital Transformation
Multimodal IT and Orchestration for Digital TransformationLeon Dohmen
 
IT Carve-Out Guide by TUM university
IT Carve-Out Guide by TUM universityIT Carve-Out Guide by TUM university
IT Carve-Out Guide by TUM universityNaoufal El Jaouhari
 
Presentation to the AEA (June 23)
Presentation to the AEA (June 23) Presentation to the AEA (June 23)
Presentation to the AEA (June 23) Daljit Banger
 
The Organic IT Department: Strategic Cost Analysis to Unlock a Sustainable Co...
The Organic IT Department: Strategic Cost Analysis to Unlock a Sustainable Co...The Organic IT Department: Strategic Cost Analysis to Unlock a Sustainable Co...
The Organic IT Department: Strategic Cost Analysis to Unlock a Sustainable Co...Juan Carbonell
 
The Room | Innotrain systematization
The Room | Innotrain systematization The Room | Innotrain systematization
The Room | Innotrain systematization Graphic Design Sydney
 
Business & Talent Dynamics of Information Technology in India
Business & Talent Dynamics of Information Technology in IndiaBusiness & Talent Dynamics of Information Technology in India
Business & Talent Dynamics of Information Technology in IndiaIRJET Journal
 
Buisness strategy
Buisness strategy Buisness strategy
Buisness strategy Rū Sh
 
Biginer it-service-catalog.pdf
Biginer it-service-catalog.pdfBiginer it-service-catalog.pdf
Biginer it-service-catalog.pdfAbdetaImi
 
User manual tr dunning lev1
User manual tr dunning lev1User manual tr dunning lev1
User manual tr dunning lev1UF Technology
 
Role of governance in SIAM
Role of governance in SIAMRole of governance in SIAM
Role of governance in SIAMRadim Petras
 
intro to maint management systems
intro to maint management systemsintro to maint management systems
intro to maint management systemsBill Sheppard
 

Similar to Transfer pricing documentation for tax purposes of IT services for an internal IT service provider (20)

Roger l brathwaite_cover_letter_it_2020
Roger l brathwaite_cover_letter_it_2020Roger l brathwaite_cover_letter_it_2020
Roger l brathwaite_cover_letter_it_2020
 
Sap tr um_dm_meter reading entry screen_v1.0
Sap tr um_dm_meter reading entry screen_v1.0Sap tr um_dm_meter reading entry screen_v1.0
Sap tr um_dm_meter reading entry screen_v1.0
 
ITSM for CxOs
ITSM for CxOsITSM for CxOs
ITSM for CxOs
 
(ONLINE) ITIL Indonesia Community – Meetup “Modern IT Service Management Tran...
(ONLINE) ITIL Indonesia Community – Meetup “Modern IT Service Management Tran...(ONLINE) ITIL Indonesia Community – Meetup “Modern IT Service Management Tran...
(ONLINE) ITIL Indonesia Community – Meetup “Modern IT Service Management Tran...
 
Sap tr um_dm_meter reading order reversal_v1.0
Sap tr um_dm_meter reading order reversal_v1.0Sap tr um_dm_meter reading order reversal_v1.0
Sap tr um_dm_meter reading order reversal_v1.0
 
IT Service Management System Measurement using ISO20000-1 and ISO15504-8: De...
IT Service Management System Measurement using  ISO20000-1 and ISO15504-8: De...IT Service Management System Measurement using  ISO20000-1 and ISO15504-8: De...
IT Service Management System Measurement using ISO20000-1 and ISO15504-8: De...
 
Domestic Data Entry Operator.pdf
Domestic Data Entry Operator.pdfDomestic Data Entry Operator.pdf
Domestic Data Entry Operator.pdf
 
Multimodal IT and Orchestration for Digital Transformation
Multimodal IT and Orchestration for Digital TransformationMultimodal IT and Orchestration for Digital Transformation
Multimodal IT and Orchestration for Digital Transformation
 
IT Carve-Out Guide by TUM university
IT Carve-Out Guide by TUM universityIT Carve-Out Guide by TUM university
IT Carve-Out Guide by TUM university
 
Dit yvol3iss13
Dit yvol3iss13Dit yvol3iss13
Dit yvol3iss13
 
Presentation to the AEA (June 23)
Presentation to the AEA (June 23) Presentation to the AEA (June 23)
Presentation to the AEA (June 23)
 
The Organic IT Department: Strategic Cost Analysis to Unlock a Sustainable Co...
The Organic IT Department: Strategic Cost Analysis to Unlock a Sustainable Co...The Organic IT Department: Strategic Cost Analysis to Unlock a Sustainable Co...
The Organic IT Department: Strategic Cost Analysis to Unlock a Sustainable Co...
 
The Development Of Cobit. Isaca
The Development Of Cobit. IsacaThe Development Of Cobit. Isaca
The Development Of Cobit. Isaca
 
The Room | Innotrain systematization
The Room | Innotrain systematization The Room | Innotrain systematization
The Room | Innotrain systematization
 
Business & Talent Dynamics of Information Technology in India
Business & Talent Dynamics of Information Technology in IndiaBusiness & Talent Dynamics of Information Technology in India
Business & Talent Dynamics of Information Technology in India
 
Buisness strategy
Buisness strategy Buisness strategy
Buisness strategy
 
Biginer it-service-catalog.pdf
Biginer it-service-catalog.pdfBiginer it-service-catalog.pdf
Biginer it-service-catalog.pdf
 
User manual tr dunning lev1
User manual tr dunning lev1User manual tr dunning lev1
User manual tr dunning lev1
 
Role of governance in SIAM
Role of governance in SIAMRole of governance in SIAM
Role of governance in SIAM
 
intro to maint management systems
intro to maint management systemsintro to maint management systems
intro to maint management systems
 

More from Ole Kristian Gravrok

Bedriftsøkonomisk lønnsomhetsbetraktning rundt IKT investeringer i Ehelse pro...
Bedriftsøkonomisk lønnsomhetsbetraktning rundt IKT investeringer i Ehelse pro...Bedriftsøkonomisk lønnsomhetsbetraktning rundt IKT investeringer i Ehelse pro...
Bedriftsøkonomisk lønnsomhetsbetraktning rundt IKT investeringer i Ehelse pro...Ole Kristian Gravrok
 
Økonomisk prosjekthåndtering for en IT avdeling
Økonomisk prosjekthåndtering for en IT avdelingØkonomisk prosjekthåndtering for en IT avdeling
Økonomisk prosjekthåndtering for en IT avdelingOle Kristian Gravrok
 
IT Økonomiprosjekt for en IT avdeling
IT Økonomiprosjekt for en IT avdelingIT Økonomiprosjekt for en IT avdeling
IT Økonomiprosjekt for en IT avdelingOle Kristian Gravrok
 
Presentasjon IT økonomiprosjekt til avdelinger
Presentasjon IT økonomiprosjekt til avdelingerPresentasjon IT økonomiprosjekt til avdelinger
Presentasjon IT økonomiprosjekt til avdelingerOle Kristian Gravrok
 
Ansvar for produksjon av fakturadata for en IT avdeling
Ansvar for produksjon av fakturadata for en IT avdelingAnsvar for produksjon av fakturadata for en IT avdeling
Ansvar for produksjon av fakturadata for en IT avdelingOle Kristian Gravrok
 
Artikkel i Kommunalteknikk fra 2002
Artikkel i Kommunalteknikk fra 2002Artikkel i Kommunalteknikk fra 2002
Artikkel i Kommunalteknikk fra 2002Ole Kristian Gravrok
 

More from Ole Kristian Gravrok (13)

Bedriftsøkonomisk lønnsomhetsbetraktning rundt IKT investeringer i Ehelse pro...
Bedriftsøkonomisk lønnsomhetsbetraktning rundt IKT investeringer i Ehelse pro...Bedriftsøkonomisk lønnsomhetsbetraktning rundt IKT investeringer i Ehelse pro...
Bedriftsøkonomisk lønnsomhetsbetraktning rundt IKT investeringer i Ehelse pro...
 
Utkast økonomimodell 07082013
Utkast økonomimodell 07082013Utkast økonomimodell 07082013
Utkast økonomimodell 07082013
 
Prosjektøkonomihåndbok utkast
Prosjektøkonomihåndbok utkastProsjektøkonomihåndbok utkast
Prosjektøkonomihåndbok utkast
 
PMO services
PMO servicesPMO services
PMO services
 
Prosjektøkonomi kurs draft
Prosjektøkonomi kurs draftProsjektøkonomi kurs draft
Prosjektøkonomi kurs draft
 
Økonomisk prosjekthåndtering for en IT avdeling
Økonomisk prosjekthåndtering for en IT avdelingØkonomisk prosjekthåndtering for en IT avdeling
Økonomisk prosjekthåndtering for en IT avdeling
 
IT Økonomiprosjekt for en IT avdeling
IT Økonomiprosjekt for en IT avdelingIT Økonomiprosjekt for en IT avdeling
IT Økonomiprosjekt for en IT avdeling
 
IT tjenester, omstrukturering
IT tjenester, omstruktureringIT tjenester, omstrukturering
IT tjenester, omstrukturering
 
New IT Financial model
New IT Financial modelNew IT Financial model
New IT Financial model
 
Presentasjon IT økonomiprosjekt til avdelinger
Presentasjon IT økonomiprosjekt til avdelingerPresentasjon IT økonomiprosjekt til avdelinger
Presentasjon IT økonomiprosjekt til avdelinger
 
Prismodell for IT tjenester
Prismodell for IT tjenesterPrismodell for IT tjenester
Prismodell for IT tjenester
 
Ansvar for produksjon av fakturadata for en IT avdeling
Ansvar for produksjon av fakturadata for en IT avdelingAnsvar for produksjon av fakturadata for en IT avdeling
Ansvar for produksjon av fakturadata for en IT avdeling
 
Artikkel i Kommunalteknikk fra 2002
Artikkel i Kommunalteknikk fra 2002Artikkel i Kommunalteknikk fra 2002
Artikkel i Kommunalteknikk fra 2002
 

Recently uploaded

Jewish Resources in the Family Resource Centre
Jewish Resources in the Family Resource CentreJewish Resources in the Family Resource Centre
Jewish Resources in the Family Resource CentreNZSG
 
Trian White Paper on Creating Value at Disney April 2024
Trian White Paper on Creating Value at Disney April 2024Trian White Paper on Creating Value at Disney April 2024
Trian White Paper on Creating Value at Disney April 2024Neil Kimberley
 
Leadership and Collaborative Qualities | Hejir Rashidzadeh
Leadership and Collaborative Qualities | Hejir RashidzadehLeadership and Collaborative Qualities | Hejir Rashidzadeh
Leadership and Collaborative Qualities | Hejir RashidzadehHejir Rashidzadeh
 
Financial Statements Guide for Small Businesses:
Financial Statements Guide for Small Businesses:Financial Statements Guide for Small Businesses:
Financial Statements Guide for Small Businesses:DoshiAccountants1
 
"Ecommerce Tomorrow: Trends, Innovations, and Consumer Revolution"
"Ecommerce Tomorrow: Trends, Innovations, and Consumer Revolution""Ecommerce Tomorrow: Trends, Innovations, and Consumer Revolution"
"Ecommerce Tomorrow: Trends, Innovations, and Consumer Revolution"vicky222yadav11
 
Strategic Project Finance Essentials: A Project Manager’s Guide to Financial ...
Strategic Project Finance Essentials: A Project Manager’s Guide to Financial ...Strategic Project Finance Essentials: A Project Manager’s Guide to Financial ...
Strategic Project Finance Essentials: A Project Manager’s Guide to Financial ...Aggregage
 
DIPLOMA IN PURCHASING AND SUPPLIES MANAG
DIPLOMA IN PURCHASING AND SUPPLIES MANAGDIPLOMA IN PURCHASING AND SUPPLIES MANAG
DIPLOMA IN PURCHASING AND SUPPLIES MANAGChrisWachira
 
BoSEU24 | Claire Suellentrop | How to Operationalise JTBD
BoSEU24 | Claire Suellentrop | How to Operationalise JTBDBoSEU24 | Claire Suellentrop | How to Operationalise JTBD
BoSEU24 | Claire Suellentrop | How to Operationalise JTBDBusiness of Software Conference
 
GUIDELINES ON USEFUL FORMS IN FREIGHT FORWARDING (F) Danny Diep Toh MBA.pdf
GUIDELINES ON USEFUL FORMS IN FREIGHT FORWARDING (F) Danny Diep Toh MBA.pdfGUIDELINES ON USEFUL FORMS IN FREIGHT FORWARDING (F) Danny Diep Toh MBA.pdf
GUIDELINES ON USEFUL FORMS IN FREIGHT FORWARDING (F) Danny Diep Toh MBA.pdfDanny Diep To
 
Interoperability and ecosystems: Assembling the industrial metaverse
Interoperability and ecosystems:  Assembling the industrial metaverseInteroperability and ecosystems:  Assembling the industrial metaverse
Interoperability and ecosystems: Assembling the industrial metaverseSiemens
 
BeMetals Presentation_Updated_April 1, 2024.pdf
BeMetals Presentation_Updated_April 1, 2024.pdfBeMetals Presentation_Updated_April 1, 2024.pdf
BeMetals Presentation_Updated_April 1, 2024.pdfDerekIwanaka1
 
Entrepreneurial ecosystem- Wider context
Entrepreneurial ecosystem- Wider contextEntrepreneurial ecosystem- Wider context
Entrepreneurial ecosystem- Wider contextP&CO
 
5-Step Framework to Convert Any Business into a Wealth Generation Machine.pdf
5-Step Framework to Convert Any Business into a Wealth Generation Machine.pdf5-Step Framework to Convert Any Business into a Wealth Generation Machine.pdf
5-Step Framework to Convert Any Business into a Wealth Generation Machine.pdfSherl Simon
 
Version Bravo- The Springboard for Navy SEAL entrepreneurship, cohort 003
Version Bravo- The Springboard for Navy SEAL entrepreneurship, cohort 003Version Bravo- The Springboard for Navy SEAL entrepreneurship, cohort 003
Version Bravo- The Springboard for Navy SEAL entrepreneurship, cohort 003Levi Shapiro
 
2023_EN. HYUNDAI CAPITAL SERVICES 2023 PERFORMANCE
2023_EN. HYUNDAI CAPITAL SERVICES 2023 PERFORMANCE2023_EN. HYUNDAI CAPITAL SERVICES 2023 PERFORMANCE
2023_EN. HYUNDAI CAPITAL SERVICES 2023 PERFORMANCEirhcs
 
Understanding market needs for startups 4_4_2024.pdf
Understanding market needs for startups 4_4_2024.pdfUnderstanding market needs for startups 4_4_2024.pdf
Understanding market needs for startups 4_4_2024.pdfRichard Guha
 
Device Management via Intune : Balancing Security and Flexibility
Device Management via Intune : Balancing Security and FlexibilityDevice Management via Intune : Balancing Security and Flexibility
Device Management via Intune : Balancing Security and FlexibilityManagedms365
 
EQX-PPT-20240405-CorporateDeck-slideshare
EQX-PPT-20240405-CorporateDeck-slideshareEQX-PPT-20240405-CorporateDeck-slideshare
EQX-PPT-20240405-CorporateDeck-slideshareEquinox Gold Corp.
 
Kyryl Truskovskyi: Training and Serving Open-Sourced Foundational Models (UA)
Kyryl Truskovskyi: Training and Serving Open-Sourced Foundational Models (UA)Kyryl Truskovskyi: Training and Serving Open-Sourced Foundational Models (UA)
Kyryl Truskovskyi: Training and Serving Open-Sourced Foundational Models (UA)Lviv Startup Club
 

Recently uploaded (20)

Jewish Resources in the Family Resource Centre
Jewish Resources in the Family Resource CentreJewish Resources in the Family Resource Centre
Jewish Resources in the Family Resource Centre
 
Trian White Paper on Creating Value at Disney April 2024
Trian White Paper on Creating Value at Disney April 2024Trian White Paper on Creating Value at Disney April 2024
Trian White Paper on Creating Value at Disney April 2024
 
Leadership and Collaborative Qualities | Hejir Rashidzadeh
Leadership and Collaborative Qualities | Hejir RashidzadehLeadership and Collaborative Qualities | Hejir Rashidzadeh
Leadership and Collaborative Qualities | Hejir Rashidzadeh
 
Financial Statements Guide for Small Businesses:
Financial Statements Guide for Small Businesses:Financial Statements Guide for Small Businesses:
Financial Statements Guide for Small Businesses:
 
Authentically Social - presented by Corey Perlman
Authentically Social - presented by Corey PerlmanAuthentically Social - presented by Corey Perlman
Authentically Social - presented by Corey Perlman
 
"Ecommerce Tomorrow: Trends, Innovations, and Consumer Revolution"
"Ecommerce Tomorrow: Trends, Innovations, and Consumer Revolution""Ecommerce Tomorrow: Trends, Innovations, and Consumer Revolution"
"Ecommerce Tomorrow: Trends, Innovations, and Consumer Revolution"
 
Strategic Project Finance Essentials: A Project Manager’s Guide to Financial ...
Strategic Project Finance Essentials: A Project Manager’s Guide to Financial ...Strategic Project Finance Essentials: A Project Manager’s Guide to Financial ...
Strategic Project Finance Essentials: A Project Manager’s Guide to Financial ...
 
DIPLOMA IN PURCHASING AND SUPPLIES MANAG
DIPLOMA IN PURCHASING AND SUPPLIES MANAGDIPLOMA IN PURCHASING AND SUPPLIES MANAG
DIPLOMA IN PURCHASING AND SUPPLIES MANAG
 
BoSEU24 | Claire Suellentrop | How to Operationalise JTBD
BoSEU24 | Claire Suellentrop | How to Operationalise JTBDBoSEU24 | Claire Suellentrop | How to Operationalise JTBD
BoSEU24 | Claire Suellentrop | How to Operationalise JTBD
 
GUIDELINES ON USEFUL FORMS IN FREIGHT FORWARDING (F) Danny Diep Toh MBA.pdf
GUIDELINES ON USEFUL FORMS IN FREIGHT FORWARDING (F) Danny Diep Toh MBA.pdfGUIDELINES ON USEFUL FORMS IN FREIGHT FORWARDING (F) Danny Diep Toh MBA.pdf
GUIDELINES ON USEFUL FORMS IN FREIGHT FORWARDING (F) Danny Diep Toh MBA.pdf
 
Interoperability and ecosystems: Assembling the industrial metaverse
Interoperability and ecosystems:  Assembling the industrial metaverseInteroperability and ecosystems:  Assembling the industrial metaverse
Interoperability and ecosystems: Assembling the industrial metaverse
 
BeMetals Presentation_Updated_April 1, 2024.pdf
BeMetals Presentation_Updated_April 1, 2024.pdfBeMetals Presentation_Updated_April 1, 2024.pdf
BeMetals Presentation_Updated_April 1, 2024.pdf
 
Entrepreneurial ecosystem- Wider context
Entrepreneurial ecosystem- Wider contextEntrepreneurial ecosystem- Wider context
Entrepreneurial ecosystem- Wider context
 
5-Step Framework to Convert Any Business into a Wealth Generation Machine.pdf
5-Step Framework to Convert Any Business into a Wealth Generation Machine.pdf5-Step Framework to Convert Any Business into a Wealth Generation Machine.pdf
5-Step Framework to Convert Any Business into a Wealth Generation Machine.pdf
 
Version Bravo- The Springboard for Navy SEAL entrepreneurship, cohort 003
Version Bravo- The Springboard for Navy SEAL entrepreneurship, cohort 003Version Bravo- The Springboard for Navy SEAL entrepreneurship, cohort 003
Version Bravo- The Springboard for Navy SEAL entrepreneurship, cohort 003
 
2023_EN. HYUNDAI CAPITAL SERVICES 2023 PERFORMANCE
2023_EN. HYUNDAI CAPITAL SERVICES 2023 PERFORMANCE2023_EN. HYUNDAI CAPITAL SERVICES 2023 PERFORMANCE
2023_EN. HYUNDAI CAPITAL SERVICES 2023 PERFORMANCE
 
Understanding market needs for startups 4_4_2024.pdf
Understanding market needs for startups 4_4_2024.pdfUnderstanding market needs for startups 4_4_2024.pdf
Understanding market needs for startups 4_4_2024.pdf
 
Device Management via Intune : Balancing Security and Flexibility
Device Management via Intune : Balancing Security and FlexibilityDevice Management via Intune : Balancing Security and Flexibility
Device Management via Intune : Balancing Security and Flexibility
 
EQX-PPT-20240405-CorporateDeck-slideshare
EQX-PPT-20240405-CorporateDeck-slideshareEQX-PPT-20240405-CorporateDeck-slideshare
EQX-PPT-20240405-CorporateDeck-slideshare
 
Kyryl Truskovskyi: Training and Serving Open-Sourced Foundational Models (UA)
Kyryl Truskovskyi: Training and Serving Open-Sourced Foundational Models (UA)Kyryl Truskovskyi: Training and Serving Open-Sourced Foundational Models (UA)
Kyryl Truskovskyi: Training and Serving Open-Sourced Foundational Models (UA)
 

Transfer pricing documentation for tax purposes of IT services for an internal IT service provider

  • 1. «Company» Transfer Pricing Transaction Module 3.X IT Products & Services 2008
  • 2. IT Products & Services TP Module 2008 Table of Contents 1 2 Introduction and Executive Summary ............................................................... 3 Scope and Abbreviations.................................................................................. 3 2.1 2.2 3 Transactional Analysis ..................................................................................... 4 3.1 3.2 3.3 3.4 3.4.1 3.4.2 3.4.3 3.4.4 3.5 3.5.1 3.5.2 3.5.3 3.5.4 3.5.5 4 Purpose and Scope ............................................................................................................ 3 Abbreviations ...................................................................................................................... 3 Introduction to the Transactions ......................................................................................... 4 «Company»’s IT organization ............................................................................................. 4 The ICT Steering Committee .............................................................................................. 5 Functional Analysis............................................................................................................. 5 Introduction ................................................................................................................................................... 5 Functions ...................................................................................................................................................... 5 Risks............................................................................................................................................................. 7 Assets........................................................................................................................................................... 7 Transfer Pricing Principles and Methodology ..................................................................... 7 Choice of transfer pricing method for the fixed price services provided by the IT Department ....................... 7 Applying the Cost-plus method – cost base .................................................................................................. 7 Applying the Cost-plus method – mark up ..................................................................................................... 8 Allocation of the cost base to the various services rendered by the three units ............................................. 8 Conclusion .................................................................................................................................................. 10 Appendix ........................................................................................................ 11 4.1 Appendix I - Typical cost base of services provided ........................................................ 11 TP Documentation 2008 2
  • 3. IT Products & Services TP Module 2008 1 Introduction and Executive Summary The purpose of this module is to give an overview of intra-group IT products and services transactions within the «Company» Group. The module will describe the covered transactions and describe the involved parties` respective contributions to the transactions. Furthermore the module will provide a description on how the intra-group prices are determined and a comparability analysis defending the prices charged for the transactions. 2 2.1 Scope and Abbreviations Purpose and Scope The present module pertains to the following categories of intra-group IT products & services transactions within the «Company» Group of companies: ERP (Enterprise Resource Planning system (SAP)) Portal services PC workstations Telephony Infrastructure services Application management services This module analyses and documents the service providers’ functions in relation to the IT products & services supplied and the cost plus methodology applied in determining the arm’s length fee payable by the service recipients. The module pertains to the fiscal year 2008. 2.2 Abbreviations The following abbreviations and acronyms are applied in this module: Abbreviation IT ITK ITC ITD SLA ICT SAP ERP CIO BU TC PG MARCO Servicedesk Explanation The entire IT & Process Innovation Department of «Company» The Customer Service Center, a unit within IT & Process Corporate IT services, a unit within IT & Process IT Infrastructure and Workplace Services, a unit within IT & Process Service Level Agreement, an agreement between two parties to supply and receive services at a pre-determined quality and cost Information and Communications technology Provider of ERP software, as well as the name of the ERP system in use by «Company» Enterprise Resource Planning. ERP systems can have functionality for accounting, procurement and logistics, etc Chief Information Officer, the head of the IT & Process Department Business Unit within «Company» Trading and continental operations, a business unit Power generation, a business unit The system in which «Company» tracks and monitors risk A function with IT, also known as Helpdesk. However, it is also an IT system in TP Documentation 2008 3
  • 4. IT Products & Services TP Module 2008 Abbreviation 3 3.1 Explanation which this particular function manages its work. Transactional Analysis Introduction to the Transactions «Company» has established a centralized IT and Process Innovation department (IT) in «Company» AS in order to provide standardized IT services to the «Company» Group. The main objective is to ensure that the «Company»group has well functioning and competitive IT solutions and services to support the core business processes in the Group. The contractual basis for providing IT services is a Service Level Agreement which is entered into between «Company» AS and the various Group companies. 3.2 «Company»’s IT organization The IT and Process Innovation department is organized as follows: TP Documentation 2008 4
  • 5. IT Products & Services TP Module 2008 The organizational units within the IT and Process and Innovation department which provide these services covered in this module are: ITD – IT infrastructure and workplace services ITC – Corporate IT services ITK – Customer service center The description of the IT organization will therefore be limited to these three units, the units inside the red frame above. These three units are staffed with about 40 specialized IT personnel, both full time employees and consultants. There is no duplication of functions performed between IT and departments / personnel in other Group companies. Please note that the service rendered from the other units shown above, are priced based on hourly rates or distributed aspart of the Intra Group Services. Please refer to the relevant transaction modules for the pricing methods. For an overall description of the IT department, please refer to the legal entity description of «Company» AS. 3.3 The ICT Steering Committee The ICT steering committee is chaired by the head of the IT department and consists of representatives from the Groups main operating units and members of the IT management team. The committee, which has no formal power, is used by the IT management team for the purpose of strengthening, communicating and obtaining feedback on strategic directions as well as for certain operational issues experienced by the customers. As such, with regards to products and services and their pricing, the committee is presented with an overview of said items. Feedback from the committee is typically reflected before implementation. 3.4 3.4.1 Functional Analysis Introduction The purpose of the Functional Analysis is to identify the characteristics of the functions performed, risks carried and assets applied related to the transactions. 3.4.2 Functions 3.4.2.1 Description of functions performed by ITD ITD provides the operational, maintenance and support functions for the following ITinfrastructure and telephony services: Operation and availability of processing power (servers) Storage, including operation of databases and backup/restore functionality Telecommunications, network and telephony services Monitoring of all IT infrastructure services to prevent downtime of data and information exchange Platform for integration of data between different corporate systems TP Documentation 2008 5
  • 6. IT Products & Services TP Module 2008 3.4.2.2 Description of functions performed by ITC The ITC unit performs the operational, maintenance and support functions for the following services: ERP services(i.e. SAP) Provides access to the different modules of the Enterprise Resource Planning system SAP used by the «Company» group (Finance, HR, Procurement/Logistics). Access gives the user the ability to perform transactions and extract reports based on user privileges. Portal services (The portal, i.e. the intranet solution) Gives the user access to various services on the intranet solution used by the «Company» Group such as: News and information, Archiving solutions, Recording worked hours etc., Various reports (finance, HR, etc), Travel expense reports, Procurement, Dictionaries, Access to software, Your employment contract and salary information, HR information, «Company»’s governance system. Application management services Operation, maintenance, and further enhancements/development of the following business solutions:     Tridon Maintenance Job Tech Interface Job Tech/SAP Cash Management module 3.4.2.3 Description of functions performed by ITK The ITK unit performs the following functions: PC workstations The users can choose between the following categories of workstations: Stationary Portable Thin client Mobile The service includes access to e-mail and standard office software such as Microsoft Office. Included are safety measures such as anti-virus and firewall to mention a few. The PC is owned by «Company» AS. In addition, the following services are included in the price of a workstation: Service Desk The service desk typically handles the following requests from users: Error situations experienced using IT systems and hardware Ordering new services Requests for changes to IT systems and user access The service desk either handles the requests themselves or passes it on to experts with specialized knowledge, in order to handle error situations, with IT systems or hardware. TP Documentation 2008 6
  • 7. IT Products & Services TP Module 2008 User management This is part of the service desk responsibilities. User management starts when a new employee starts his or her work. The service desk establishes the user in the IT systems with the privileges determined at the time. It also deals with changes to user access and privileges, as well as deletion of users at the time of employment termination. 3.4.3 Risks The IT department has a significant responsibility in order to manage and mitigate risks incurred by providing IT services. However, the Service Level Agreements with the customers (the other companies within the Group) eliminate/reduce the finance risk related to the supply of the services mentioned above. The Service Level Agreements do not penalize the IT organization financially if a potential threat should be inflicted upon one or more of our customers due to failing IT services. Hence, the operational risk is not priced into our services. Risks are managed through a separate process with the help of an IT system called MARCO. There are also financial risks on the cost side of providing services to our customers, however, these risks are always there, and in fact given the fact that our prices are cost-based, we do have an option to adjust prices (up, or down) to reflect a changed cost base over the year. However, this will always be presented to the ICT Steering Committee in advance. 3.4.4 Assets To provide the services mentioned under ITC, ITK and ITD, the following assets are used: Personnel Office facilities and related infrastructure Hardware (servers, network equipment) Office equipment Software and licenses Know-how (IT understands «Company» business processes) All assets are owned and operated by «Company» AS the company IT & Process is part of. 3.5 3.5.1 Transfer Pricing Principles and Methodology Choice of transfer pricing method for the fixed price services provided by the IT Department To determine the arm’s length price of the services mentioned under chapter 3.4.2 above, the IT Department has applied the Cost-plus method. Please refer to the Masterfile for a description and the reasons for selecting this method. 3.5.2 Applying the Cost-plus method – cost base The cost-base used for the pricing of the services consists of the unit’s total wages and salaries, in addition to standard personnel related costs such as training, mobile phone usage etc. Additionally, product service related costs such as license/hardware maintenance fees and communication costs are included as well asdepreciation expenses related to IT projectsand hardware purchases. TP Documentation 2008 7
  • 8. IT Products & Services TP Module 2008 These costs are tracked against the various services performed and represent the cost base for each service. 3.5.3 Applying the Cost-plus method – mark up Due to the limited riskon the provider side, see chapter3.4.3 above, and the fact that the major part of the cost base consists of external costs, a markup of 3% is applied on the cost base in order to determine the arm’s length price of the various services rendered by the IT department to other group companies. 3.5.4 Allocation of the costbaseto the various services rendered by the three units Please see the flowchart that follows in chapter 3.5.4.4 below. 3.5.4.1 Provided by ITD The cost base of ITD is distributed based on the number of servers used in support of thefollowing services described in this document: Telephony services ERP services Portal services Services for various applications PC workstation services The cost base pr user of telephony services is then established by dividing the cost baseof Telephony services by the number of telephony users. 3.5.4.2 Provided by ITC The cost base of ITCincluding the infrastructure cost transferred from ITD is distributed based on the personnel resources used to run each service. For ERP and Portal services, the cost base pr user is calculated based on the total cost divided by the registered users of each service. For the application services, the cost base for each application service is the total cost allocated to the application. 3.5.4.3 Provided by ITK The cost base of ITKand the infrastructure cost transferred from ITD is distributed to the various PC workstation categories. The cost base of each PC Workstation category is determined based on the depreciation cost of each category of PCs and onthe number of personnel resources needed to run and maintain the service. The cost base pr user of each PC workstation category is then determined by dividing the cost base by the registered users of each PC workstation category. Within«Company» AS the cost of the various services are transferred to the users with no mark-up. A mark-up of 3% is added to the invoicing of the services to users in other Group companies. TP Documentation 2008 8
  • 9. IT Products & Services TP Module 2008 The cost/prices are presented to the ICT Steering Committee in the beginning of the year, and cost transfers/invoicing takes place on a monthly basis. The invoicing is based on signed agreements with the relevant Group companies in «Company». 3.5.4.4 Flowchart showing interactions between IT units in delivering services to customers TP Documentation 2008 9
  • 10. IT Products & Services TP Module 2008 3.5.5 Conclusion In the opinion of «Company» AS, the above cost-base and mark-up used demonstrates that the fixed prices of the IT services rendered within the «Company» Group are in compliance with the arm’s length principle. TP Documentation 2008 10
  • 11. IT Products & Services TP Module 2007 - Appendix 4 4.1 Appendix Appendix I - Typical cost base of services provided Most services use a larger or smaller part of the typical operational expense cost items of the budgets of the service provider units ITC, ITK and ITD. Cost item Wages and salaries (including corresponding social costs) Depreciation expense Freight costs Electricity Housing rent and other related expense (security, snow clearing, etc) Software licenses and maintenance costs Repair and maintenance of hardware IT consulting services Office supplies IT hardware components Mobile phones Magazines and newspapers Training for employees Telephone (including mobile phones) and fax Communication costs (ADSL, LAN, WAN, etc) Travel expense including lodging and food Meetings and seminars including entertainment expense Advertizing Expensed project costs Office services IT services Purchase of personnel from other parts of the «Company» Group TP Documentation 2008 11