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.
EdgarStat® contains an internal regression model to calculate the beta-risk coefficient of an individual enterprise stock price return compared to the return of the S&P 500 stock price (market) index. This stock price return regression model is known as CAPM.
Topics: Tutorial Valuation CAPM
Read moreRegression analysis yields more reliable profit indicators than the linear equation without intercept specified in US and OECD transfer pricing guidelines.
Topics: Profit Indicators Transfer Pricing Tax Controversy
Read moreDr. Ednaldo Silva illustrates why asset intensity adjustments to the Return on Assets profit indicator are redundant and unviable.
Topics: Return on Assets Asset Intensity Adjustment Profit Indicators
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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