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.
There are often legitimate concerns with using book value versus market value of assets in applying a Return on Assets approach in transfer pricing. While employing a Return on Costs approach may be a reliable alternative, it must also account for comparability differences in asset intensity.
Topics: Return on Assets Contract Manufacturer Financial Economics Benchmarking Asset Intensity Adjustment CAPMRead more
Dr. 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 IndicatorsRead more
Ad 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/CPMRead more