The EdgarStat Blog explores issues in transfer pricing and application of the transactional net margin method (TNMM or CPM in the US) and other enterprise profit-based methods.
In this tutorial, we address comparability adjustments for differences in the currency of the tested loan to that of the comparable transactions.
Topics: Interest Rates Tutorial CUFT Financial Transactions Intercompany Financing
Read moreNotwithstanding its acceptance in Coca Cola Co. v. Commissioner of the IRS, Return on Assets is a controversial profit indicator to use in transfer pricing. At the very least it must be subject to economic analysis to corroborate a relationship between operating profit and operating assets.
Topics: Tutorial Return on Assets Profit Indicators Tax Controversy
Read moreAd hoc adjustments are a risky endeavor in transfer pricing. Using regression analysis, we can test if asset intensity is relevant to explain the behavior of the operating profit markup or profit margin and calculate a reliable adjustment to the profit indicator.
Topics: Tutorial Asset Intensity Adjustment Profit Indicators TNMM/CPM
Read moreThe prevalent use of quartiles to determine profit indicators often results in a wide (unreliable range) and ad hoc assets adjustments. These problems can be solved by using regression analysis, which produces more defensible statistical ranges of the profit indicator resistant to audit scrutiny.
Topics: Tutorial Profit Indicators TNMM/CPM
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