Transactional Databases

odern accounting systems maintain detailed transactional databases, providing rich sources of information that can be used to document prices and support or challenge the results of profit-based analyses. ECS routinely prepares analyses of such data that are subject to audit by government agencies.

FSC Allocations

Transaction-by-transaction reporting or marginal costing can increase the benefit of using a Foreign Sales Corporation (FSC) for qualified export sales. ECS works closely with clients and Counsel to create transactional databases, optimal allocations, and the requisite audit trail. Using customized software applications, ECS identifies the option that maximizes each client’s FSC benefits.

• ECS worked with a major multinational firm to develop a transactional database, calculate the FSC commission attributable to each transaction, generate reports quantifying and supporting the claimed FSC commission, and to demonstrate that all information could be reconciled back to the company’s financial statements and tax returns. The result doubled the client’s tax savings.

Transfer Pricing Analyses

Transactional databases can be used to compare prices received or paid for items sold to or purchased from both related and unrelated parties, to compare margins for transactions involving related parties with margins for similar transactions involving only unrelated parties, and to explore the implications of alternative ways of grouping transactions. The use of transactional data in transfer pricing analyses may be expected to increase as tax authorities and taxpayers become less willing to accept the results of generalized entity level CPM analyses.

• ECS was retained prior to examination by a taxpayer in anticipation of an IRS audit. ECS used the taxpayer’s detailed transactional records to derive arm’s length prices for each item sold, and compared those prices with the actual transfer price paid for each item to determine appropriate adjustments. Backed by this detailed transactional analysis, the adjusted transfer prices successfully passed the IRS examination.

Antidumping Practice

ECS assists firms in preparing detailed databases, ranging from a few thousand to millions of transactions, for submission to the U.S. Department of Commerce ("DOC") as part of antidumping investigations. ECS is responsible for ensuring that the databases and analysis survive audit by DOC personnel.

• Antidumping calculations involve the comparison of prices charged in one market with prices charged for the same or similar products in a different market. When product attributes vary by market, the selection of which specific models are matched and the determination of how adjustments are made can have significant impacts upon results. ECS’ proprietary program determines which model matchups produce optimal results.