Methods & benchmarking
One-Sided Method
A one-sided method tests only one party to a controlled transaction, typically the less complex entity, against comparable independent companies, rather than analysing the combined profit of both parties. The resale price method, cost plus method and transactional net margin method are all one-sided approaches, contrasted with.
One-sided methods rely on identifying a tested party whose functions are relatively routine and can be reliably benchmarked against independent comparables, leaving the other, typically more complex, party to retain the residual profit or loss after the tested party earns its arm's length return. This approach simplifies the.
Choosing a one-sided method depends on the best method rule, which requires selecting the approach best suited to the facts, considering the availability of reliable comparables, the complexity of each party's functions, and the extent to which each party contributes unique value. When both parties make significant unique.
In practice
What matters when applying one-sided method
- Benchmarks only the less complex party in a transaction
- Includes resale price, cost plus and TNMM approaches
- Contrasted with two-sided methods like profit split
- Simplifies analysis by avoiding valuation of unique intangibles
- Selection depends on the best method rule and available data
Frequently asked
Common questions
Why are one-sided methods more commonly used than profit split?+
One-sided methods are generally easier to apply because they rely on identifying a less complex tested party and benchmarking it against readily available comparable company data from commercial databases. Profit split, by contrast, requires reliable data on the combined profits of both parties and a defensible basis for splitting them, which is often harder to obtain.
How is the tested party chosen in a one-sided method?+
The tested party is normally the entity performing the less complex functions, bearing fewer risks and not owning valuable intangible assets, since its results are easier to benchmark reliably against independent comparables.
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.