ACCA Strategic Professional · Advanced Financial Management · Dividend policy in multinationals and transfer pricing
Which OECD-endorsed transfer pricing method sets the price for a transaction between related parties by reference to the price charged in comparable transactions between independent parties?
The comparable uncontrolled price method. It benchmarks the intra-group price directly against prices charged between independent parties in similar circumstances, making it the most direct application of the arm's length principle when reliable comparables exist.
- AComparable uncontrolled price methodCorrect
- BTransactional net margin method
- CProfit split method
- DCost plus method
Explanation
The comparable uncontrolled price method directly compares the price in the controlled transaction with prices in uncontrolled transactions. Cost plus and resale price use margins, TNMM uses net profit indicators, and profit split divides combined profit.
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