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AMERICAS’ SAP USERS’ GROUP
Transfer Prices: Transfer Prices: Conceptual Overview Conceptual Overview & Project Report& Project ReportThomas Kaiser, SAP-AG WalldorfRoy Brown, Polaroid Corporation
1999 ANNUAL CONFERENCE & VENDOR FAIR
May 16 - 19, 1999Dallas Convention CenterDallas, Texas
Copyright 1999
1999 ANNUAL CONFERENCE & VENDOR FAIR
AMERICAS’ SAP USERS’ GROUP
Copyright 1999
Polaroid CorporationPolaroid Corporation Global Imaging Company
$2 Billion in Annual Revenue Major Product Lines
Instant Photographic Cameras & Film, Digital Hardware & Software, Conventional Films & Polarizing Filters & Lenses
Key Markets Amateur & Professional Photography, Industry,
Graphic Arts, Science, Medicine, Government & Education
1999 ANNUAL CONFERENCE & VENDOR FAIR
AMERICAS’ SAP USERS’ GROUP
Copyright 1999
Polaroid CorporationPolaroid Corporation To Service these Markets
Sales Offices & Distributors in all Major Regions: Americas, Europe & Asia Pacific
Seven major Manufacturing Centers United States Mexico Europe Asia
PGIHeliosHolographyTech PolarizerSunglassesOther NBManufacturingProduct Dev
New Business
Corporate G&ACorporate OtherResearchMFG Dev
Other
Polaroid Corp
1999 ANNUAL CONFERENCE & VENDOR FAIR
AMERICAS’ SAP USERS’ GROUP
Copyright 1999
Polaroid SAP Global Polaroid SAP Global ProjectProject SAP 4.0B Module Implementation
PP: Distribution Requirements Planning MM: Manufacturing Planning &
Production and Procurement SD: Order Fulfillment & Logistics Finance
Financial Accounting Controlling
Reporting Special Purpose Ledger, SIS & LIS
1999 ANNUAL CONFERENCE & VENDOR FAIR
AMERICAS’ SAP USERS’ GROUP
Copyright 1999
Polaroid SAP Global Polaroid SAP Global ProjectProject SAP 4.0B Finance Modules
Financial Accounting GL, AR, AP & Asset Accounting
Controlling Cost Center Accounting, Product Costing,
PA, Internal Order Mgmt. Enterprise: PCA
– Future Plans: Consolidation Material Ledger & Parallel Valuations
1999 ANNUAL CONFERENCE & VENDOR FAIR
AMERICAS’ SAP USERS’ GROUP
Copyright 1999
Polaroid SAP Project Polaroid SAP Project TeamTeam Global Structure: 200+ full time members
Product Definition (Material Master) Global Supply Chain- Sales/Distribution Manufacturing Purchasing Finance Reporting Basis RICE Development Group
1999 ANNUAL CONFERENCE & VENDOR FAIR
AMERICAS’ SAP USERS’ GROUP
Copyright 1999
Polaroid SAP Project Polaroid SAP Project ScheduleSchedule Global Phase Implementation
1/99: Global Supply Chain, US Logistics & Finance, Digital & Optics Manufacturing
4/99: Chemical Coating Manufacturing 7/99: Europe Manufacturing &
Sales/Marketing (Commissionaire) 8/99: US Manufacturing Assembly Plants 10/99: Canada, Puerto Rico, Latin America &
Mexico 1/2000: Japan 4/2000: China
1999 ANNUAL CONFERENCE & VENDOR FAIR
AMERICAS’ SAP USERS’ GROUP
Copyright 1999
Polaroid Tax StrategiesPolaroid Tax Strategies Transfer Pricing & Inter-company Processing
Patent & Trademarks owned by Parent Co. Buy & Sell between “unrelated” parties globally
Contracts with foreign manufacturers & distributors Contracts in Europe: Commissionaires, July 1999
Movement of Materials: Invoicing with Transfer Prices using Cost Plus Methods
Use Foreign Tax Credits to maximize Net Income Consolidate Inter-company Profits but eliminate for Financial &
Management Reporting
1999 ANNUAL CONFERENCE & VENDOR FAIR
AMERICAS’ SAP USERS’ GROUP
Copyright 1999
Polaroid Transfer Price Polaroid Transfer Price StrategiesStrategies Materials Shipped between Polaroid Legal
Entities in Different Countries Require TPs Consistent with 3rd Party Pricing Must Meet Arms Length Test Applicable to Materials & Services
Legal Entities Must Earn Reasonable Profits to be Competitive and Achieve Corporate Goals Compliance with Local Tax Laws
Monitor Statutory & Internal Reporting by Business Unit
1999 ANNUAL CONFERENCE & VENDOR FAIR
AMERICAS’ SAP USERS’ GROUP
Copyright 1999
Polaroid Transfer Price Polaroid Transfer Price CharacteristicsCharacteristics Complex Billing Chains
Europe– 3 Manufacturing Sub Contractors for main billing “ HUB ”– Contracting CV, sells onto European Business Center
» CV, a Distribution Center Direct Ships to Customer– International Business Center Sells to European Subs &
these Subs become Commissionaires in July– European Subs sell to their Customers
Non-Europe– Contracting CV Sells to Foreign Subs while their
Manufacturers Direct Ships to Foreign Subs– PolCorp Buys from Manufacturers and Sells to Marketing
Subsidiaries
1999 ANNUAL CONFERENCE & VENDOR FAIR
AMERICAS’ SAP USERS’ GROUP
Copyright 1999
Polaroid European Polaroid European CommissionaireCommissionaire
•
•
Physical Product Flow:Commissionaire
Manufacturing
Plant
(US or Europe)
European Distribution
CenterShip to Europe
D.C.Ship to
CommissionaireHub
HUB
ContractingManufacturing
PlantVale Enschede
Polaroid IBC
Polaroid -Contracting
CV
Commissionaire
Ship to EndCustomer
Third PartyCustomer
I-CTransfer
price
Non Contracting
Manufacturing Plant
Non Europe
Transfer price
Legal Product Flow:
I-CTransfer
price
Customer
I-CTransfer
priceStops at IBC
TransferI-C
Price to CustomerLess
Commission Fee !
Invoice @ SalesPrice
1999 ANNUAL CONFERENCE & VENDOR FAIR
AMERICAS’ SAP USERS’ GROUP
Copyright 1999
Polaroid Inter-company Polaroid Inter-company ProcessesProcesses Business Requirements
Simplify & Standardize the Processes Globally Incorporate Better Controls & Procedures Automate Transactions in the Process Accounts between Supplier & Receiver Always in
Balance– Track & Value In-transit Inventories
Reduce/Eliminate Invoicing Errors Minimize Paper Flow Global Visibility of Transactions, Postings &
Account Balances by Company Code Centralize Operations Where Feasible
1999 ANNUAL CONFERENCE & VENDOR FAIR
AMERICAS’ SAP USERS’ GROUP
Copyright 1999
Polaroid Transfer Price Reporting Polaroid Transfer Price Reporting NeedsNeeds Business Requirements
Include Inter-company Profit for Local Statutory Reporting– Use Actual YTD Variable, Month End Exchange Rate
Exclude Inter-company Profit for Management Reporting– Use Annual Standard Budgeted Exchange Rate
Track & Value Inter-company Profit through the Entire Billing Chain for– Internal & External Reporting Eliminations and – Tax Filings
Automate Management Reporting – Provides “Report Card” Results for GMs and Controllers– Manual eliminations performed today
1999 ANNUAL CONFERENCE & VENDOR FAIR
AMERICAS’ SAP USERS’ GROUP
Copyright 1999
Polaroid Transfer Pricing in Polaroid Transfer Pricing in SAPSAP Two Orders Used in fully Integrated Modules
Stock Transport Orders NB Purchase Orders– Inventory Replenishment at Distribution Centers
Sales Orders– Drop Shipments to Customers
Primary SAP Tools DRP -> Purchase Requisitions MM Procurement SD Logistics Product Costing & Material Ledger Parallel Valuations
1999 ANNUAL CONFERENCE & VENDOR FAIR
AMERICAS’ SAP USERS’ GROUP
Copyright 1999
Polaroid Transfer Pricing in Polaroid Transfer Pricing in SAPSAP
DRP & MRP
Convert PR to PO
Ship Materials
Create Billing
Create ARReceive Goods
Create AP
Net AP & AR
Std Cost & Transfer PricingIn-transit InventoriesManagement ReportingCustoms & DutiesAccount Reconciliations