Embridge provides valuation services to determine the arm’s length nature of intercompany transfers or to determine the fair (market) value of assets, liabilities or shares. Depending on the valuation project, our valuation studies align with local tax regulations, OECD Transfer Pricing Guidelines and general accounting principles. Valuation projects typically involve the transfer of intangible assets such as trademarks, client relationships, patents and goodwill. In addition we also perform valuation of financial assets and liabilities, valuation of shares and valuations in the context of transfer pricing restructurings or conversions. In the event of a restructuring, a fair market value of profit shifts may be required to reflect the reallocation of functions, assets and risks.
Valuation studies for tax purposes may vary from valuation studies for accounting purposes or 3rd party transactions. The main differences include:
- Financial statements pre-transfer cannot not be taken for granted when performing a valuation for tax purposes. Where needed, transfer pricing normalisations should be considered in the event balance sheet and/or P&L items are not at arm’s length;
- Assumptions used in the valuation study should align with the transfer pricing model pre- and post transfer;
- A two sided approach should be considered where the perspective of both the seller and the buyer are taken into account in order to arrive at an arm’s length price range; and
- The documentation of a tax valuation study should include detailed descriptions on assumptions used and methods applied.
The objective of a tax valuation study is to support the arm’s length nature of an intercompany transaction towards tax authorities and auditors in order to defend the profit allocation among jurisdictions involved. The objective of a valuation for accounting purposes is to support the fair value of assets, liabilities and/or shares recorded on the balance sheet.
Embridge has experience in a wide range of valuation projects, including:
- Valuation of intangible assets such as client relationships, trademarks or production capacity;
- Valuation of a group entity or a portfolio of entities;
- Valuation of financial assets, such as fair value assessments of loans, bonds or options; and
- Valuation of or profit shifts/goodwill.
In addition to the above, we offer financial modelling services in the context of transfer pricing optimisation projects.