Addressing your challenges with blockchain
An intercompany expense allocation process requires many capabilities to execute effectively, such as data storage, calculation and simulation, reporting, and data integration and modeling.
When an expense allocation approach is enabled by blockchain, the system gains a permanent, immutable digital record of all network transactions and contract details, enabling complete transparency, data integrity and consistency across key network participants. The secure, tamper-proof database stores key data points — such as computation rules, input cost centers, allocation keys and inter-affiliate agreements — that are used to execute and justify the allocation of costs between legal entities.
Through smart contracts, a differentiating blockchain feature, FIs can leverage such digital records to recalculate allocated costs years after they were first performed, returning the exact original values — regardless of any updates to the organization, cost structure and various agreements.
Companies are equipped with a greater ability to withstand the scrutiny of tax and regulatory authorities, which are likely to perform retrospective examinations years after the apportionment has been calculated and the costs have been transferred. The fear of not being able to pass the deductibility test or justify the cost transfer pushes FIs to make overconservative assumptions on deduction claims — for instance, in transfer pricing and on sales taxes — that negatively impact the bottom line.
Blockchain also eliminates disputes between legal entities related to allocated charges, as approvals — by regional controllers or other designated approvers — are a prerequisite for generating a new entry in the database, and those approvals create an immutable audit trail with a permanent digital record.