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September 30, 2021
Our US member firm CBIZ MHM have published a new resource for Internal Audit on “How to Incorporate New Internal Audit Developments into Your Risk Management Game Plan.”
The phrase, “the best offense is a good defence” describes how risk management strategies protect your organisation in the current environment. If you haven’t revised your internal audit game plan recently, you may want to check in with your advisory team. The game has changed. You’ll need a whole new playbook that reflects these trends, cultural shifts, technological advancements and other factors that could have a significant bearing on the internal audit function
Read CBIZ MHM’s guide to get more insights into what to do next here.
September 22, 2021
David Whitmer, of CBIZ MHM in the United States, has written a piece for Taxation Magazine on current global issues for transfer pricing.
September 17, 2021
Mayer Hoffman McCann P.C. (MHM) today announced that it has signed a definitive agreement to acquire the attest practice of Shea Labagh Dobberstein (SLD), a leading accounting service provider based in San Francisco, CA, with a closing effective September 1, 2021.
Founded in 1944, SLD is a leading full-service accounting firm providing accounting, tax and consulting services to public and private businesses. With around 100 associates, they are ranked as one of the Top 150 accounting firms in the nation.
With this acquisition, clients receiving audit and attest services by SLD will now have them provided under the MHM name. The tax and consulting work will be performed by CBIZ, a national business service provider that has a strategic association with MHM. Working together, MHM and CBIZ are the 10th largest accounting service provider in the country, as ranked by Accounting Today. SLD’s strong reputation, longstanding relationships, and active presence in the Bay Area, combined with the national resources and personal service of MHM, strengthens CBIZ MHM’s commitment to serving clients in Northern California and across the United States.
Andy Burczyk, MHM President stated, “We are thrilled to have the SLD team join our growing attest practice. They are one of the longest-standing and most respected accounting firms in the San Francisco Bay Area. Their practice lines up well with some of our existing strengths, especially in key verticals such as the Distribution industry and Employee Benefit Plan Audits. We look forward to serving the needs of their existing clients under the MHM name, and creating new relationships in the Northern California market. I am confident we will see continued growth in and around the Bay Area under the local leadership of Jim Dobberstein.”
August 31, 2021
This article was originally published in Accountancy Daily, view here.
Previously accepted comparables used for establishing a company’s transfer pricing policy might not be comparable due to the impact of the pandemic, warn David Whitmer, transfer pricing practice leader and Srinidhi Tuppal, transfer pricing manager at Kreston Global.
With only over 13% of the total world population fully vaccinated against the Covid-19 virus, the world economy is struggling to recover from the impact of the pandemic. As businesses grapple with employee retention, government restrictions, and other safety compliance issues, multinational entities have additional considerations concerning their cross-border transactions and taxes.
While ensuring the arm’s length standard is the mantra of transfer pricing, finding real-world data to support an arm’s length valuation for its related party transactions that are regional, functionally comparable, and at a similar stage in the pandemic might be challenging.
Due to the lack of comparables in similar industries, multinationals sometimes rely on companies that perform similar functions, eg, distribution, manufacturing, or sales and marketing functions, to determine the arm’s length range. Previously accepted comparables used for establishing a company’s transfer pricing policy might not be comparable due to the impact of the pandemic.
On 18 December 2020, the OECD published its guidance on the transfer pricing implications of the Covid-19 pandemic, intending to aid the tax authorities and taxpayers dealing with complexities due to economic uncertainties caused by the pandemic. The OECD guidelines provide clarifying comments and examples for comparability, losses, government assistance, and agreements.
For a tested party performing a distribution function, the transfer pricing analysis might include distributors from other industries performing similar functions in its set of comparable companies. While almost all industries faced supply chain disruptions, not all industries were negatively impacted by the pandemic.
According to an analysis by S&P Global, industries that were significantly affected include airlines, restaurants, clothing and home furnishing retailers. Construction industries were positively impacted, and steel and timber prices are at a record high. However, restaurants and other leisure hospitality industries struggle to keep their businesses open. A manufacturer tested party should factor in domestic circumstances, including shutdowns and labour availability, while considering companies for comparability analysis.
Allocating pandemic losses to limited risk distributors or contract manufacturers that are expected to earn a specific rate of return could raise a red flag to the tax authorities (since the entrepreneurial entity is typically expected to take on higher risk and reward based on their functional profile).
The OECD provides guidelines on allocating Covid-19 specific costs, and in some cases, there may be circumstances that warrant a low-risk functional entity to bear losses in the short term. Considering the impact of such loss allocations in the financials of the comparables and making relevant adjustments to ensure comparability, reviewing the transfer pricing agreement for the functions, risks and assets of the related entities, including the availability of force majeure clause, would serve in establishing the loss allocation criteria and help mitigate tax adjustments.
Although ensuring the health and safety of its citizens is the top priority, governments across the globe implemented assistance programmes, including financial and liquidity support, to ensure business continuity. Companies that took advantage of these measures, including preferential term financing and loan deferrals, must maintain proper books of accounts. These benefits affect the recipient’s market advantage and cost base, necessitating taking into account the receipt of government assistance when reviewing potential comparables.
One of the critical transfer pricing strategies affected by economic conditions resulting from the Covid-19 pandemic was the applicability of existing unilateral, bilateral, and multilateral advanced pricing arrangments (APAs). The key benefit of APAs is to provide tax certainty regarding international transactions for tax purposes.
In the absence of breach of any critical assumption, existing APAs must be respected and upheld. However, in some cases, the economic conditions resulting from the global pandemic may warrant a revision, cancellation, or revocation of APAs. Multinationals should review their existing APAs and consider renegotiating the terms of an APA if it results in a tax advantage. Further, multinationals should account for the time and cost impact of renegotiating these agreements. Companies in the process of renegotiating an APA should expect delays in the process.
The Covid-19 crisis will continue to evolve and have a material impact on business. However, the transfer pricing concept will not change. The profit and loss allocation will continue to be based on the related entities’ functions, risks, and assets. Companies should review their transfer pricing policy to ensure that the policies align with the new economic reality.
In a global context of digitalisation of economies, tariff wars, and economic uncertainties fueled by the global pandemic, transfer pricing represents a tool for multinationals to strategise business and tax planning. It has also put transfer pricing in the limelight for tax authorities looking to identify potential profit shifting. Proactively engaging the tax authorities with contemporaneous documentation of specific and extensive details regarding geography, timing, and the reasoning for the price setting are the key to avoiding tax penalties and adjustments.
David Whitmer, CBIZ transfer pricing practice leader and transfer pricing network lead and Srinidhi Tuppal, CBIZ transfer pricing manager at Kreston Global
August 13, 2021
Sector: Life Sciences & Healthcare
Daré Bioscience is a clinical-stage biopharmaceutical company committed to the advancement of innovative products for women’s health. The company identifies, develops and brings to market a diverse portfolio of therapies. These aim to expand treatment options, improve outcomes and convenience in areas including contraception, sexual health, and fertility.
The company was founded as a private enterprise but with the aim of becoming a larger public company in the future. Kreston Global member CBIZ MHM had already been working with the CEO and CFO of Daré Bioscience over many years when they were on the board of directors and audit committee of a not-for-profit client.
When the time came for a reverse-merger into a public company on NASDAQ, Daré Bioscience needed two years of financial statements audited promptly. CFO, Lisa Walters-Hoffert called her CBIZ MHM contact, Mike Lichtenberger, who quickly arranged for the audits to be completed promptly. This kept the merger transaction ‘alive’, and it went ahead successfully. CBIZ MHM later helped out to ensure that all of the company’s SEC filings were completed on time.
Mike Lichtenberger, Managing Director at CBIZ MHM, LLC, commented: “It’s a great feeling to help a client solve issues that could potentially cause problems. The team here did a great job and we are very pleased that the company achieved this mile-stone and looks forward to an exciting future.”
“We are truly grateful to Mike and his team for acting so quickly and professionally when we needed their assistance the most. They went ‘the extra mile’ for us multiple times during and after the merger process. Our company would not be where it is today without their timely support and guidance.” – Lisa Walters-Hoffert, CFO of Daré Bioscience, Inc.
July 8, 2021
