Broad-based analysis
A broad-based analysis provides a description of the context in which the transaction takes place. The analysis is based on the situation at the time of the transaction.
The description of both general and specific conditions related to the industry, external environment, group, company, and value chain enhances the understanding of the transaction. A broad-based analysis will be similar for many transactions the company undertakes and can therefore often be reused with minor adjustments.
The Norwegian Tax Administration expects the broad-based analysis to include a description of:
- the external environment, industry, and market
- the group and the group's value chain
- the company and the company's role within the group
The broad-based analysis is a part of the transfer pricing documentation.
The transaction is assessed in the context in which it is conducted. We require more detailed explanations, descriptions, and documentation if you conduct transactions in a manner that does not align with the conditions typically applicable to transactions in the industry, market, etc.
External environment
The external environment refers to external factors that may have economic significance and affect the industry. These may include:
- laws and regulations
- political decisions
- international decisions, such as economic sanctions against a state
- economic cycles, market fluctuations
- technological developments, such as digitalisation
- opinion formation and development – changes in public opinion can amplify or reduce various activities, such as the green transition
- trends – actors may be influenced by trends
The industry and the market
A good description of the industry should outline the value drivers, the functions and assets that create value, and the economic risks involved.
In this analysis, several aspects may be important to highlight, including:
- Are products and/or services sold to other businesses?
- Are products and/or services sold to consumers?
- Is the market geographically limited, for example, is the market global or local?
- Is the industry new, in a growth phase, or mature?
- Is there a concentration of actors in the market?
- What provides competitive advantage in the market? Is it price, quality, or customer service?
- General risks in the industry and market that are of significant economic importance.
The following questions may be relevant for gaining a comprehensive understanding of the group.
About the group
- What is the group's legal ownership structure?
- Who is part of the group's management, and how do the decision-making processes take place?
- Have there been significant organisational changes? This could include restructuring, changes in functions, assets, and risks.
- Do you have particular expertise or resources within the group, such as intangibles, that provide a competitive advantage in the market?
- Who are the group's main competitors?
- What is the group's market share broken down by business areas and geographical locations?
The group's value chain
A value chain describes the physical flow of goods, and the activities performed within the group to create value.
Questions you should answer to identify and describe the value chain include:
- What is the group's operational structure?
- Which companies are responsible for the different business areas?
- Which functions and assets are value-creating for the group?
- Which companies are responsible for key functions, assets, and significant risks?
- How is the responsibility for key functions, assets, and significant risks distributed among the different companies within the group?
There are various models for describing a value chain, and individual groups will often have their own way of illustrating the group's value chain.
Below is an example of a value chain.
Group risks
- What are the group's significant risks?
- Who manages the group's significant risks?
- How does the group manage significant risks?
Group strategy
- Is the group's business newly established, well-established, or in an expansion phase?
- What is the group's strategy for the key business areas?
- What is the rationale behind the strategies the group follows?
About the company
- When was the company founded?
- What is the company's organisational structure?
- Who are parts of the company's management, and how do the decision-making processes take place?
- Have there been significant organisational changes? This could include restructuring, changes in functions, assets, and risks.
- Do you have expertise or resources within the company, such as intangibles, that provide a competitive advantage in the market?
- Who are the company's main competitors?
- What is the company's market share within each business area and geographical region?
About the company's business
- What is the company's main business activity? This could be service provision, research and development, production, or sales.
- What are the company's key business areas?
- Where does the company operate?
- Who are the company's main customers?
About the company's risks
- What are the company's significant risks?
- Who manages the company's significant risks?
- How does the company manage significant risks?
About the company's strategy
- Is the company's business newly established, mature, or in a growth phase?
What is the company's strategy for its key business areas?