The degree of consistency in accounting practices between the controlled transaction and the uncontrolled comparables that materially affect operating profit affects the reliability of the result. Thus, for example, if differences in inventory and other cost accounting practices would materially affect operating profit, the ability to make reliable adjustments for such differences would affect the reliability of the results.
§ 1.482-5(c)(3)(ii) Consistency in accounting.
Category: (c) Comparability and reliability considerations, Transfer Pricing Guidelines, US IRC Section 482 on Transfer Pricing, § 1.482-5 Comparable profits method | Tag: Accounting consistency, Accounting differences, Comparable Profits Method (CPM), GAAP (Generally Accepted Accounting Principles), Transactional net margin method (TNMM)
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Next » Related Guidelines
- TPG2022 Chapter II paragraph 2.90Difficult comparability issues can arise where the accounting treatment of some items by potential third party comparables is unclear or does not allow reliable measurement or adjustment (see paragraph 2.81). This can be the case in particular for depreciation, amortisation, stock option and...
- TPG2022 Chapter II paragraph 2.62This Part provides a discussion of transactional profit methods that may be used to approximate arm’s length conditions where such methods are the most appropriate to the circumstances of the case, see paragraphs 2.1 – 2.12. Transactional profit methods examine the profits that...
Related Case Law
- US vs Medtronic, August 2022, U.S. Tax Court, T.C. Memo. 2022-84Medtronic had used the comparable uncontrolled transactions (CUT) method to determine the arm’s length royalty rates received from its manufacturing subsidiary in Puerto Rico for use of IP under an inter-group license agreement. The tax authorities found that Medtronic left too much profit...
- Peru vs “TP-Packaging”, July 2021, Tax Court, Case No RTF 06526-1-2021“TP Packaging” is mainly engaged in the marketing of packaging materials, which in 2013 required a number of goods and services provided by its related companies. The transfer pricing analysis of the controlled transactions was carried out with “TP Packaging” as the tested...