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White Paper 2018-01-12T18:50:21+00:00

Transfer Pricing & Business Valuation

THOUGHT LEADERSHIP

We are in the areas of intangible asset valuation, transfer pricing, and general valuation theory. Our and publications have been recognized by corporate clients, lawyers, and tax authorities as offering real advances. Our valuation models are transparently available to our clients, allowing us to work jointly with them on many of their most important valuation and transfer pricing matters.

Strategic Dispute Resolution in a Post-BEPS World

The OECD/G20 BEPS initiative has been accompanied by increased audit activity around the globe, with tax authorities focusing on intercompany structures and transactions which, while often passing muster in the past, are now suspect. The EU State Aid decisions raise their own interesting questions, in that having a transaction ‘‘blessed’’ by a local tax authority no longer appears to offer complete protection from further inquiry and adjustment.

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EP White Paper & Transfer Pricing Articles | Amazon Transfer Pricing Case

Economic Issues Arising from the Tax Court Decision in the Amazon Transfer Pricing Case

Earlier this year, the U.S. Tax Court issued its decision in Amazon.com, Inc. v. Commissioner. The case involved various issues, with the larges dollar issue arising because of the “buy-in” payment that Amazon’s Luxembourg affiliate mate to Amazon US when the two entities entered into a cost sharing agreement in 2005. As will be discussed, the economic experts retained by the taxpayer and the IRS reached very different conclusions as to the value of the buy-in payment.

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EP White Paper & Transfer Pricing Articles | Tax Cuts and Jobs Act

Tax Cuts and Jobs Act

This article focuses on the recently enacted Tax Cuts and Jobs Act and describes the major provisions impacting transfer pricing. The Act will result in significant changes to the U.S. taxation of cross-border transactions and foreign operations of U.S. multinational enterprises.

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EP White Paper & Transfer Pricing Articles | Accurately Pricing Intercompany Debt

Accurately Pricing Intercompany Debt

The standard approach to pricing intercompany debt is to use a variant of the Comparable Uncontrolled Price (“CUP”) method. This method estimates an arm’s length range of interest rates solely by reference to the rate of interest on debt for borrowers with credit ratings that are similar to that of the borrower in the controlled (intercompany) loan transaction. While the simplicity of this approach is appealing, it has three primary weaknesses . . .

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EP White Paper & Transfer Pricing Articles | Cost of Capital When Discounting Residual Profit

Cost of Capital When Discounting Residual Profit

The terms “cost of capital,” “discount rate,” and “required rate of return” all mean the same thing.  The basic idea is simple – a capital investment of any kind, including intangible capital, represents foregone consumption today in return for the likelihood of more consumption tomorrow…

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EP White Paper & Transfer Pricing Articles | On the Use (and Misuse) of Market Multiples

On the Use (and Misuse) of Market Multiples

The use of market multiples such as the Price-to-Earnings (“P/E”) ratio to value portfolios of intangible assets, and for that matter legal entities, is increasingly common among tax authorities and taxpayers.  This short paper develops an important distinction between “direct” and “indirect” market multiples, and in so doing highlights one way in which market multiple methods are misused by both tax authorities and taxpayers . . .

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EP White Paper & Transfer Pricing Articles | Capital Intensity Margins

Capital Intensity and Margins

 This paper accomplishes three things.  First, it examines the economic meaning of the term “profit,” and its relationship to capital at risk.  A clear definition of profit is important in transfer pricing analysis, because much confusion still exists regarding the precise relationship between “functions,” “risks,” “assets,” and profit. . .

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EP White Paper & Transfer Pricing Articles | A New Model for Valuing and Decomposing the Enterprise

A New Model for Valuing and Decomposing the Enterprise

This book presents and explores a valuation model called the Profit Vintages Method (“PVM”).  The PVM is a new and useful way of describing and understanding the firm and its component parts.  It resolves certain problems that have plagued the valuation field for many years, clarifies concepts that have existed in an incoherent form, and yields new insights about the value and asset composition of the firm. . .

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Identifying and Evaluating Contributions to Value within a Firm

The past several years have seen an increased emphasis by transfer pricing regulatory bodies (tax authorities and quasi-regulatory bodies such as the United Nations and the OECD) on the economic determinants of value within the multinational enterprise.  Arguably, this has corresponded with a de-emphasis, by the same transfer pricing regulators, of intercompany contracts and the comparability of controlled and uncontrolled transactions. . .

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