An example of a working capital adjustment designed to reflect differing levels of accounts receivable, accounts payable and inventory is provided in the Annex to Chapter III. The fact that such adjustments are found in practice does not mean that they should be performed on a routine or mandatory basis. Rather, the improvement to comparability should be shown when proposing these types of adjustments (as for any type of adjustment). Further, a significantly different level of relative working capital between the controlled and uncontrolled parties may result in further investigation of the comparability characteristics of the potential comparable.
TPG2017 Chapter III paragraph 3.49
Category: A. Performing a comparability analysis, OECD Transfer Pricing Guidelines (2017), TPG2017 Chapter III: Comparability Analysis | Tag: Comparability adjustments, Comparability analysis, Working capital adjustment« Prev | Next »
TPG2017 Chapter III paragraph 3.54
Ensuring the needed level of transparency of comparability adjustments may depend upon the availability of an explanation of any adjustments performed, the reasons for the adjustments...TPG2017 Chapter III paragraph 3.53
It is not appropriate to view some comparability adjustments, such as for differences in levels of working capital, as “routine” and uncontroversial, and to view certain...TPG2017 Chapter III paragraph 3.47
The need to adjust comparables and the requirement for accuracy and reliability are pointed out in these Guidelines on several occasions, both for the general application...OECD COVID-19 TPG paragraph 9
The unprecedented change in the economic environment following the outbreak of COVID-19 creates unique challenges for performing comparability analysis. The pandemic may have a significant impact...OECD COVID-19 TPG paragraph 54
Third, adjustments for accounting consistency may be required to improve comparability. Adjustments for accounting consistency are designed to eliminate the effect of differing accounting practices between...
TP case laws
Argentina vs Volkswagen Argentina S.A., December 2019, Court of Appeal, Case No CAF 057064/2013/CA001 – CA002