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Comparable uncontrolled price method

The comparable uncontrolled price method sets an intra-group transfer price directly from the price charged in a similar transaction between independent parties, adjusted for any material differences between the two deals.

ByHoang TruongUpdated

FrameworkOECD Transfer Pricing Guidelines

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An independent supplier sells the same grade of steel to unrelated customers at €620 per tonne on standard 30-day terms. A related-party sale is made on extended 60-day terms, which market evidence shows normally commands a 1.5% discount, or €9.30. Adjusting the comparable price for that difference gives €610.70 per tonne, the arm's-length transfer price for the intra-group sale.

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SubjectManagerial AccountingAdvancedTopicTransfer PricingAdvanced

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PracticeCORE

An independent seller sells an identical grade of aluminium to unrelated buyers at €1,450 per tonne on standard cash terms. A related-party sale within the group is made on extended 90-day credit, and market evidence shows a 2% price discount is normally given for that extended credit term. Using the comparable uncontrolled price method, what transfer price should be used for the intra-group aluminium sale?

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