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 CAPM
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
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