Should Depreciation Be Marked Up in a Transactional Net Margin Method Context for Service Providers?
International Transfer Pricing Journal, January/February 2008
5 Pages Posted: 25 Jan 2008
This article analyses the position that theoretically, although not in practice, the inclusion or exclusion of depreciation in a cost base should not alter the markup in the context of the transactional net margin method. The two key reasons why depreciation should be excluded from the analysis are considered, namely because comparables often exhibit capital intensity considerably different to the tested party and there is an inherent arbitrariness in selecting the depreciation method, thereby making the depreciating figure unreliable.
Keywords: transfer pricing, cost base, depreciation
JEL Classification: L00
Suggested Citation: Suggested Citation