Control of transactions between related parties and validation of expenses
- Related parties may also enter into cost contribution agreements, these agreements must also comply with the "arm`s length" principle, and the costs incurred must be adequately documented. Agreements may be concluded between two or more related parties but may also include unrelated parties. The subject of the agreement is also the analysis of contributions to transactions, adequate use of resources, and possibly the effects of tax incentives and state subsidies.
- Cost contribution agreements outline the relationship between the participants regarding the allocation of costs, development risks, production or procurement of assets, services or rights, and determine the nature and extent of each participant's assets, resources, services or rights.
- The benefits of joining such an agreement may be known in advance, but also uncertain, when it comes to joint research or development venture. Some benefits are realized in a short period of time, while certain can be realized only in later periods, so it is necessary to define relations precisely enough at the very beginning, in order to avoid possible disagreements in later periods.
- The most common type of cost contribution agreement is an agreement on the joint development of intangible assets.