How to select comparables for your transfer pricing analysis

When carrying out a transfer pricing analysis for a controlled transaction between associated entities, the aim is to determine whether the transaction was carried out at arm’s length. You can use comparables data to establish whether the conditions of the transaction were the same as they would have been had the transaction occurred between unrelated entities.

Because of the complex nature of intellectual property valuation, it can be difficult to find reliable comparables data that meets the strict comparability criteria required for certain transfer pricing methods. This article explains how you can get started with your search.

How to use a database to select comparables for your transfer pricing analysis

One of the ways you can find accurate comparables data for transfer pricing and intellectual property valuation is to use a commercial database. Databases such as RoyaltyRange enable you to specify the exact conditions of the controlled transaction you’re analyzing, so that you can easily find licensing agreements that match the comparability criteria of your search.

Before you begin your search for comparables, you need to accurately delineate the controlled transaction so that you fully understand the conditions and features. You can also choose the transfer pricing method (or methods) that you are going to use for your analysis.

Accurately delineate the controlled transaction

One of the ways you can find accurate comparables data for transfer pricing and intellectual property valuation is to use a commercial database. Databases such as RoyaltyRange enable you to specify the exact conditions of the controlled transaction you’re analyzing, so that you can easily find licensing agreements that match the comparability criteria of your search.

Before you begin your search for comparables, you need to accurately delineate the controlled transaction so that you fully understand the conditions and features. You can also choose the transfer pricing method (or methods) that you are going to use for your analysis.

Accurately delineate the controlled transaction

The first step to finding suitable comparables data is to accurately delineate the controlled transaction that you’re analyzing. This means fully understanding the commercial and financial relations between the associated entities, as well as the specific features of the controlled transaction. If you do not carry out a detailed functional and risk analysis, you will not be able to determine whether any uncontrolled transactions are suitably comparable.

Select a transfer pricing method

You can then move onto selecting the most suitable transfer pricing method for your analysis. The method you choose will depend on the individual circumstances of the transaction you’re analyzing, which you will determine through the functional analysis.

Use a royalty rates database to find reliable comparables

Now that you have accurately delineated the controlled transaction and chosen a transfer pricing method, you can start your search for comparables. To use RoyaltyRange, all you need to do is select your search criteria in the One Search database search box, enter your contact details, and submit your search. You can filter your search by criteria such as IP type, keywords, NACE Rev. 2, SIC, date, territory and exclusivity of contract. You will get a detailed list of potentially comparable licensing agreements within just a few hours, at no cost. You can then look through the search results, choose the ones that are suitably comparable to your transaction, and pay for the full versions of the reports. Once we send you the final reports, you will have access to the full data you need for the analysis, including royalty rates.

How to know if an uncontrolled transaction is comparable

When you have a number of potentially comparable agreements and need to assess which ones are suitably comparable with your transaction, you will need to carry out a comparability analysis. If the differences between the transactions can be reasonably adjusted to eliminate any effect on price, then the uncontrolled transaction is comparable.

When you search for comparable licensing agreements using the RoyaltyRange database, each search is carried out manually and the data is checked against 50 comparability factors. As such, you can be sure that you will only receive results that meet your search criteria.

Find comparables quickly and easily today

Enter your search criteria into RoyaltyRange One Search today for reliable comparables.