Cost Allocation Procedures

#TransferPricing case study: When India Pays for US Management Services - Things to Take Care. Recently, I worked with an Indian subsidiary paying its US parent for “Management Services”—think strategy advice, financial planning, and HR support. Sounds simple, but transfer pricing in these cases is anything but simple. Step 1: Did India Actually Receive the Service? Our first job was to check if these services were really delivered. We went beyond agreements and invoices—reviewing call logs, project files, and even email threads to confirm the US team actually did the work for India. We have advised to maintain quarterly email files and logs for this. If we couldn’t find proof of real activity, that “service” didn’t make the cut. This is often argued and looked at in detail by the tax authorities and also the higher courts and tribunals. Step 2: The Benefit Test Next, we applied the benefit test. Even if a service was provided, did India genuinely benefit from it? OECD guidelines are clear: if a service doesn’t help the Indian business or add value, it’s not chargeable. So, we mapped out each activity and showed exactly how it made a difference for the Indian operations. Step 3: Allocating Expenses Properly Once the genuine, beneficial services were clear, we focused on expense allocation. The US parent supported many group companies—so only a fair, evidence-based share of those costs could be charged to India. We built an allocation key, using things like headcount and usage records, all backed up with data. Step 4: Setting the Right TP Model Finally, we deployed the full Cost Plus method, in line with OECD best practice for intra-group services. We benchmarked the mark-up using global data and documented every decision. The Result? ✔️ Payments were fully backed by evidence, with real benefit and substance ✔️ India paid only its fair share, and the US parent recovered costs correctly ✔️ TP documentation was audit-ready and robust Key Lesson: For management services, it’s not enough to show a contract or invoice. You must prove the service was delivered, show a real benefit, allocate costs fairly, and follow the right TP model. That’s what makes your TP story bulletproof. We have recently gone experienced multiple tribunal cases on these, and gone are the days when the members used to give decisions only on the basis of legal merits. Ever faced a similar situation? Let’s connect and talk! TransPrice Tax Advisors TransPrice-GDT Tax Advisors (UAE)

💡 Day 17 of 30 Days of Azure Well-Architected Framework — Cost Optimization When cloud costs are shared across many teams, who owns what? That’s where cost allocation, showback, and chargeback come in. In the Cost Optimization pillar, financial accountability is just as important as technical efficiency. Azure provides built-in tools to help: ✅ Tagging & Policy Enforcement — define consistent tags like CostCenter, Project, Environment and enforce them with Azure Policy. ✅ Tag Inheritance — make sure subscription or resource group tags flow into usage and billing data. ✅ Cost Allocation Rules — redistribute shared service costs (like networking or security) to the right teams for accurate reporting. ✅ Showback vs. Chargeback — start with showback for visibility, and move to chargeback when your organization is ready to enforce financial responsibility. ✅ Automation & Dashboards — integrate allocations into monthly runs, statements, and team dashboards for ongoing optimization. ⚠️ Keep in mind: allocation rules don’t change your Azure invoice, and reservations/savings plans can’t be split this way. Some services still don’t fully support tagging. 👉 Getting started: begin small with 2–3 cost centers, tag consistently, and build maturity over time. This approach helps shift cloud spending from a mystery into a shared responsibility across the business. It’s not just about saving money — it’s about enabling better decisions, transparency, and alignment. 🔗 Where do you stand today — showback, chargeback, or still at the starting line? #Azure #Cloud #FinOps #AzureWAF #CostOptimization #WellArchitected #AzrueTips #MicrosoftAzure #MicrosoftCloud #CostCenter #AzureTags

SAP FICO Enhancement: Automating Cost Center Allocations Objective: Automate the allocation of costs from a primary cost center to multiple secondary cost centers based on user-defined criteria. Technical Explanation: Exit/BADI Utilized: COOM_ALLOCATION for enhancing cost allocation. Logic: Leverage new ABAP syntax to define rules for splitting costs using inline declarations and table expressions. Implementation Steps: Fetch data: Use Open SQL enhancements to fetch primary cost center data directly into an internal table: SELECT FROM cost_center_allocation FIELDS primary_cc, secondary_cc, allocation_percent WHERE allocation_date = @sy-datum INTO TABLE @DATA(lt_allocations). Allocation calculation: Loop through lt_allocations using the new FOR expression: DATA(lt_results) = VALUE #( FOR allocation IN lt_allocations ( primary_cc = allocation-primary_cc secondary_cc = allocation-secondary_cc allocated_cost = allocation-amount * allocation-allocation_percent / 100 ) ). Post allocations: Use BAPI BAPI_COSTCENTER_ALLOC_POST to create cost documents for each secondary cost center.