Comparables refer to “comparable transactions”. A comparable transaction is considered to be similar to a tested (or controlled) transaction with respect to several comparability factors, as follows: accounting standards; products or services; functions performed (eg., research & development, manufacturing, distribution); assets employed; risks assumed; contractual terms; and geographic market. Using company comparables selected from EdgarStat, we can determine an “arm’s-length range” of gross profits (divided by operating revenue, cost of sales, or operating expenses) or operating profits (divided by operating revenue, total costs and expenses, or operating assets) to test the controlled transaction that is subject to cross-border tax audit/compliance.

U.S. Treasury Regulations § 1.482-1(d) provides the standards for comparability. The OECD Transfer Pricing Guidelines § 1.15 provides similar standards.