NERA Releases Practical Solutions for Intercompany Pricing", an In-Depth Economic Analysis of Transfer Pricing Policies

Experts Advise Multinational Corporations on Best Methods to Reduce Tax Risk, Maximize Profitability, and Optimize Use of Global Resources - New Updated Edition!

New York, December 16, 2002 -- Internal pricing policies have long been a challenge for companies with multiple operating units. This challenge is compounded for businesses that operate in multiple countries. Resource allocation decisions and business unit profit incentives must be developed within the context of increased vigilance by sophisticated national tax authorities, who require that intercompany transactions be priced as if negotiated by independent, unrelated parties. The situation is further complicated by new U.S. legislation that creates strict independence standards for firms that provide advice and counsel in this area.

In the newly updated Practical Solutions for Intercompany Pricing," National Economic Research Associates (NERA) analyzes the major tax issues facing multinational corporations (MNCs) and recommends strategies for developing effective transfer pricing policies that integrate business and tax considerations. NERAs transfer pricing specialists advocate proactively articulating internal pricing policies to minimize the corporate tax burden.

Effective intercompany pricing policies can also help maximize total global profits," said NERA Senior Vice President Dr. Harlow Higinbotham. Transfer pricing policies not only establish accurate competitive information on costs and profit, but also provide sound economic bases for resource allocation and valuation decisions, performance measurement, and management incentives."

Practical Solutions for Intercompany Pricing" describes the methods for establishing transfer pricing policies under the arms length standard, that is, prices negotiated by independent, unrelated parties. Business-oriented transfer pricing policies incorporate external market conditions, competitive tests, and economic logic, which make them defensible upon tax audit.

Even if no readily identifiable market for similar goods or services is apparent, however, economic analysis based on sound theory can simulate what the terms or results of the transactions would be in an arm's length setting," said NERA Senior Vice President Dr. Richard Rozek. Given the inherent complexities and innumerable relevant variables in this type of exercise, MNCs that require expert input should complement their tax reporting and planning based on rigorous economic analysis."

While effective intercompany pricing policies have never been more important, implementation has become far more challenging. Recent U.S. legislation requires public companies to re-evaluate their choice of professional service firms for their financial, legal, and consulting needs. Transfer pricing is one of the many issues affected by this new legislation, and companies must take into account the issue of independence when choosing their service provider.

Widely recognized for its independence and the rigor of its economic analysis, NERAs Transfer Pricing Practice has extensive experience in developing and implementing pricing strategies, resolving conflicts related to intercompany pricing actions, and negotiating agreements with tax authorities on appropriate transfer pricing methodologies.

Practical Solutions for Intercompany Pricing" draws on the experience of NERAs experts advising clients in numerous industries on maximizing profits or minimizing costs. The new edition may be ordered via the NERA web site (www.nera.com), where a complete guide to NERAs transfer pricing services is also available.

About NERA

Founded in 1961, NERA is a firm of consulting economists who understand how markets work. Our clients include corporations, governments, law firms, regulatory agencies, trade associations and international agencies. Our global team of 450 professionals operates in 16 offices across North and South America, Europe, Asia and Australia.

NERA is a Marsh & McLennan company. MMC (www.mmc.com) is a global professional services firm with annual revenues of $10 billion and approximately 58,000 employees providing analysis, advice and transactional capabilities to clients in over 100 countries. NERA readily draws upon the capabilities of our sister firms, including Marsh Inc., the world's leading risk and insurance services firm; Putnam Investments, one of the largest investment management companies in the United States; and Mercer Consulting Group, a major global provider of consulting services including Mercer Human Resource Consulting, Mercer Delta Organizational Consulting, Mercer Investment Consulting, Mercer Management Consulting and Lippincott & Margulies Identity & Brand Strategy Consulting.

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