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Indirect Cost Agreement
"I need an Indirect Cost Agreement for our Pakistan-based shared services center that will allocate IT and administrative costs across five subsidiary companies in the APAC region, with implementation planned for March 2025."
1. Parties: Identification of all parties to the agreement, including their legal status and registration details
2. Background: Context of the agreement, existing relationships between parties, and purpose of the cost-sharing arrangement
3. Definitions: Detailed definitions of terms used throughout the agreement, particularly technical terms related to cost accounting
4. Scope of Agreement: Overview of activities and costs covered under the indirect cost arrangement
5. Cost Pool Definition: Detailed description of what constitutes indirect costs under this agreement
6. Allocation Methodology: Agreed method for calculating and allocating indirect costs between parties
7. Payment Terms: Timing and method of indirect cost payments or settlements
8. Record Keeping: Requirements for maintaining cost records and supporting documentation
9. Audit Rights: Provisions for verifying cost calculations and examining supporting documentation
10. Term and Termination: Duration of the agreement and conditions for termination
11. Dispute Resolution: Process for resolving disagreements about cost calculations or allocations
12. Governing Law: Specification of Pakistani law as governing law and relevant jurisdictions
1. Cost Adjustment Mechanism: Used when parties want to include provisions for periodic review and adjustment of cost allocation percentages
2. Service Level Requirements: Include when the cost sharing is tied to specific service levels or performance metrics
3. Intellectual Property Rights: Necessary when shared costs include technology or IP-related expenses
4. Confidentiality: Include when cost information is sensitive or proprietary
5. Transfer Pricing Compliance: Required when parties are related entities subject to transfer pricing regulations
6. Force Majeure: Include when parties want protection from unexpected events affecting cost structure
7. Insurance Requirements: Necessary when cost sharing includes risk-related elements requiring insurance coverage
1. Schedule A - Cost Categories: Detailed listing and description of all indirect cost categories covered by the agreement
2. Schedule B - Allocation Keys: Specific metrics and formulas used for cost allocation calculations
3. Schedule C - Calculation Examples: Sample calculations showing how the cost allocation methodology works in practice
4. Schedule D - Reporting Templates: Standard formats for regular cost reporting and reconciliation
5. Schedule E - Excluded Costs: List of costs specifically excluded from the indirect cost pool
6. Appendix 1 - Contact Details: List of key personnel responsible for cost management and their contact information
7. Appendix 2 - Documentation Requirements: Detailed requirements for supporting documentation and record keeping
8. Appendix 3 - Review and Approval Process: Step-by-step process for periodic review and approval of cost allocations
Authors
Manufacturing
Information Technology
Professional Services
Construction
Healthcare
Education
Financial Services
Telecommunications
Logistics and Supply Chain
Research and Development
Consulting Services
Shared Services Industry
Finance
Accounting
Tax
Legal
Operations
Procurement
Internal Audit
Compliance
Treasury
Shared Services
Corporate Finance
Financial Planning and Analysis
Chief Financial Officer
Finance Director
Cost Accounting Manager
Financial Controller
Operations Director
Shared Services Manager
Tax Manager
Corporate Finance Manager
Business Unit Head
Compliance Officer
Treasury Manager
Procurement Director
Group Finance Manager
Financial Planning Analyst
Internal Audit Manager
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