Fundamentals
Benchmarking Study
A benchmarking study is an economic analysis that identifies comparable independent transactions or companies to test whether an intercompany price, margin or royalty rate falls within an arm's length range. It uses commercial databases to find comparables by industry, function and geography, then applies statistical tools.
Benchmarking studies underpin most transfer pricing methods, particularly the transactional net margin method and the cost plus method, by providing external evidence of what unrelated parties earn in similar circumstances. Analysts search databases such as Orbis or Amadeus, then screen out companies that are not comparable.
Once a comparable set is finalised, the results are expressed as an interquartile range of financial ratios such as operating margin, giving flexibility to price within an accepted band rather than at a single point. Good practice is to refresh the study every three years and update the financial data annually.
In practice
What matters when applying benchmarking study
- Tests intercompany pricing against independent comparable data
- Commonly uses databases such as Orbis or Amadeus
- Applies quantitative and qualitative screening criteria
- Results expressed as an interquartile range of margins
- Should be refreshed periodically to remain defensible
Frequently asked
Common questions
How often should a benchmarking study be updated?+
Most tax authorities and OECD guidance recommend refreshing the comparable search every one to three years, depending on jurisdiction, industry volatility and transaction materiality, while updating existing comparables' financial data annually even when the search is not repeated. Fast-changing sectors often warrant annual full refreshes to stay reliable.
What makes a company a good comparable in a benchmarking study?+
A good comparable performs similar functions, uses similar assets and bears similar risks to the tested party, operates in a comparable industry and market, and has reliable, sufficiently detailed financial data available. Analysts screen out companies with significant related-party transactions, financial distress, or unusual events such as mergers.
See how the tooling handles this in practice
Our transfer pricing tools calculate intercompany charges, benchmark financing and reconcile the intercompany ledger from your own data. Book a short walkthrough and we will show the workflow on a scenario that matches your group structure, rather than a generic demo dataset.