The use of budgeted costs can also raise a number of concerns where large differences between actual costs and budgeted costs result. Independent parties are not likely to set prices on the basis of budgeted costs without agreeing on what factors are to be taken into account in setting the budget, without having regard to how budgeted costs have compared with actual costs in previous years and without addressing how unforeseen circumstances are to be treated.
TPG2017 Chapter II paragraph 2.102
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By OECD
Category: OECD Transfer Pricing Guidelines (2017) | Tag: Budgeted costs or actual costs, Denominator - costs, Precision of budgets, Profit Level Indicator (PLI), Transactional net margin method (TNMM), Transactional profit method, Transfer pricing methods
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