TP Documentation: Build a Functions, Assets and Risks Interview
A practical guide to tp documentation, with a worked example, evidence checklist, common mistakes and steps to prepare a defensible working.
AI Summary
Operations and finance teams describe the same service centre differently. The useful result is a working that explains the facts, the calculation or classification, and the evidence behind the conclusion. This guide shows how to prepare that working and where a reviewer should investigate before accepting the result.
Scope and applicable period
Indian transfer-pricing documentation for FY 2025–26 / AY 2026–27, with legacy provision references. For Tax Year 2026–27, use the Income-tax Act, 2025 and Income-tax Rules, 2026; OECD guidance does not override Indian law.
Verification date: 11 October 2026. Figures and rates identified as assumptions are teaching examples; apply the stated conditions and the actual facts to a real assignment.
The key principle
A functions, assets and risks interview should describe what the business actually does. Interview operations, finance and commercial staff, compare their explanations with agreements, and identify who controls significant risks and has the financial capacity to bear them. Contract wording alone is insufficient when actual conduct differs. Keep the facts connected to the specific controlled transaction.
Worked example
| Item | Value or fact | What it means |
|---|---|---|
| Pricing decision | Group sets list prices | Interview sales team |
| Customer credit | Local team approves terms | Check approval evidence |
| Inventory exposure | Local entity holds stock | Inspect ageing and loss records |
| Product IP | Group-owned | Verify rights and local contributions |
These facts may point to a mixed profile rather than a simple routine-distributor label. Ask who decides stock levels, absorbs obsolete inventory and funds unpaid customer balances. Record examples of real decisions and trace them to approvals. A questionnaire filled only by the tax team may overlook operational evidence. Reconcile the interview findings with segment accounts and the method-selection memo; explain any difference between written allocation and actual conduct instead of deleting inconvenient answers.
A practical sequence
Select staff who actually perform or supervise the material activities and ask for recent decision examples. Compare interviews with contracts, approvals, assets and risk outcomes.
Record who controls risks and how decisions are funded and implemented. Reconcile the verified profile with the selected method and tested-party analysis.
Resolve contradictions explicitly; replacing a factual interview with generic contractual wording makes the file less reliable.
Separate the factual file from the pricing conclusion
Transfer pricing depends on reliable transaction facts and comparability. Contracts, actual conduct, segment accounts and external evidence should tell a consistent story. A margin calculation is only one part of the analysis: the method, tested party, profit indicator, comparable data and adjustments all need reasons. Keep assumptions visible, preserve original data and reconcile the study with reported transactions. OECD materials help analyse issues, but the applicable Indian provisions and rules govern the Indian compliance conclusion. Do not treat a sample percentage, a contractual charge or a favourable comparable as an automatic arm’s-length result.
Evidence checklist
Keep the following records linked to the same entity, period and working version. Identify missing items explicitly; a checked box should mean the document was examined and supports the stated conclusion.
- Interview questions and participants
- Decision and approval examples
- Agreements and asset records
- Risk-event history
- FAR-to-method reconciliation
Common mistakes and how to avoid them
- Copying generic FAR descriptions. Compare the conclusion with the interview questions and participants and resolve any conflicting facts.
- Equating legal ownership with all economic contributions. Trace the affected item to the agreements and asset records before finalising the working.
- Ignoring contradictory operational facts. Use the far-to-method reconciliation to make the final position and remaining exceptions clear.
Before you finalise
Recheck the example’s assumptions against the actual assignment, resolve the identified exceptions and make the final figure or conclusion traceable to its source. Preserve the reviewed version and the reason for material changes. For this task, the far-to-method reconciliation should agree with the conclusion presented to the client, reviewer or authority.
Frequently asked question
Should every department be interviewed? Select people with direct knowledge of the material functions and risks; a targeted evidenced interview is better than a long generic form.
Sources and further reading
- Rule 10D — transfer pricing information and documents
- OECD Transfer Pricing Guidelines, 2022
- Income Tax Department — transfer pricing guidance
Related guide: Identify associated enterprises form 3ceb section 92a.