Can the valuations used for financial reporting be used for transfer pricing and tax reporting?

Both the IRS and the OECD have pointed out that valuations of intangible assets (“IP”) for financial reporting and transfer pricing are not exactly the same, and taxpayers should not assume that financial statement auditors and tax authorities would accept one for the other.

Under US GAAP and IFRS Fair Value is the benchmark for the price that would be received to sell an asset or paid to transfer a liability between market participants at the measurement date.

For Transfer Pricing (tax reporting) purposes the Arm’s Length Standard is the benchmark to achieve the results that would have been realized between uncontrolled taxpayers.

Although similar, financial reporting and transfer pricing definitions of IP are different in several areas which often lead to different valuation results.

Aggregation Approach For Financial Reporting And Transfer Pricing

Financial reporting focuses on tangible and intangible assets acquired and liabilities assumed. Excess is recorded as goodwill. Read More