Cost method, Comparable profitability method - Pricing

Cost method

Represents a method for determining the compliance of foam in the analyzed market price based on a comparison of the gross profitability of the person's costs, which is the party to the analyzed transaction (the group of analyzed homogeneous transactions), with the market interval of gross profitability of costs in comparable transactions.

The cost method can be used, in particular, in the following cases:

1) when performing works (rendering services) by persons who are interdependent with the seller (except when using intangible assets that significantly affect the seller's profitability level when performing work (rendering services));

2) the provision of money management services, including the implementation of trading operations in the securities market and (or) the foreign exchange market;

3) providing services for the performance of the functions of the sole executive body of the organization;

4) the sale of raw materials or semi-finished products to persons who are interdependent with the seller;

5) the sale of goods (works, services) under long-term contracts between interdependent persons.

If the gross profitability of the seller's costs that is the party to the transaction under analysis is within the profitability range for the specified transaction, it is recognized that the price applied in the analyzed transaction corresponds to market prices.

If the gross profitability of the seller's costs is less than the minimum value of the profitability interval, the chain applied in the analyzed transaction is determined based on the actual cost of the goods sold (works, services) and the gross profitability of costs, which corresponds to the minimum value of the profitability interval.

If the gross profitability of the seller's costs exceeds the maximum value of the profitability interval, the price applied in the analyzed transaction is determined based on the actual cost of goods sold (works, services) and gross profitability of costs, which corresponds to the maximum value of the profitability interval.

In order to apply the cost method, it is allowed to use information-price agencies on prices (price intervals) for identical (homogeneous) goods (works, services) and to determine the interval of the market price for identical (homogeneous) goods (work, services).

The application for the taxation of the minimum or maximum value of the profitability interval is made provided that this does not lead to a reduction in the amount of tax payable to the budget system of the United States.

Example . Recycler A purchases from the independent supplier B the graphitized products at a price of 1,000 rubles per ton; spends on the processing of products 500 rubles per ton and sells it to the interdependent B at a price of 2,000 rubles/t.

The interval of profitability for comparable uncontrolled transactions of other manufacturing industries is 25-35%. The gross profitability of the costs of the processor A is determined as follows:

2000 - (1000 + 500) = 500 (gross profit): 1500 (cost price) = 0.33, or 33%.

As the profitability of company A costs falls within the range of profitability used in the controlled transaction, the price is recognized as corresponding to the market price.

Comparable Profitability Method

The method is to compare the operating profitability of a person who is a party to the transaction under analysis to the market interval of operating profitability in comparable transactions.

The method of comparable profitability can be used, in particular, in the absence or inadequacy of information on the basis of which it can reasonably be concluded that there is a necessary degree of comparability of commercial and (or) financial conditions of the transactions being compared.

In the case of the comparable profitability method, the following operating profitability indicators can be used:

1) Return on sales;

2) cost-effectiveness;

3) profitability of commercial and administrative costs;

4) return on assets;

5) another indicator of profitability, reflecting the relationship between the functions performed, the assets used and the economic (commercial) risks and the level of remuneration.

When choosing a specific profitability indicator, the type of activity performed by the person that is the party to the transaction under analysis, the functions, assets and economic (commercial) risks that are taken, the completeness, reliability and comparability of the data required to calculate the appropriate profitability, as well as the economic soundness such an indicator.

Profitability indicators are used taking into account the following features:

1) profitability of sales - with the subsequent resale of goods purchased from persons who are interdependent with the reselling person to persons who are not interdependent with it, and also in the subsequent resale of goods purchased from persons who are not interdependent with the person , reselling, persons who are interdependent with it;

2) gross margin selling and administrative expenses - in cases where the person carrying out the re-sale, bears little economic (commercial) risks associated with the acquisition and subsequent resale of the goods in a short period and at the same time there is a direct relationship between the amount of gross profit from the sales person , carrying out the resale, and the amount of commercial and managerial expenses carried out by him;

3) profitability of costs - when performing works, providing services, as well as producing goods;

4) return on assets - in the production of goods (in particular, if the analyzed transactions are made by persons who carry out capital-intensive activities).

When using the method of comparable profitability with a market profitability interval, the profitability of that party of the analyzed transaction that meets the following requirements is compared:

1) the party to the transaction under analysis performs functions whose contribution to the received profit for transactions consistently committed with the same commodity is less than the contribution of the other party to the transaction being analyzed;

2) the party to the transaction under analysis takes less economic (commercial) risks than the other party to the transaction being analyzed;

3) the party to the transaction under analysis does not own objects of intangible assets that have a significant impact on the level of profitability.

If the party to the transaction under analysis does not meet the requirements specified in the above sub-paragraphs, the side of the analyzed transaction that meets the specified requirements to the greatest extent is selected for comparison with the market profitability interval.

If the profitability of a controlled transaction is within the range of profitability, it is recognized that the price applied in this transaction is consistent with market prices.

If the profitability of the controlled transaction is less than the minimum value of the profitability interval, the minimum value of the profitability interval is taken into account.

If the profitability exceeds the maximum value of the profitability interval, the maximum value of the profitability interval is taken into account.

Based on the accounted minimum or maximum value of the profitability interval, profit (income, revenue) is adjusted for a controlled transaction for tax purposes.

The application for the taxation of the minimum or maximum value of the profitability interval is made provided that this does not lead to a reduction in the amount of tax payable to the US budget system.

Example. Production company A sells interconnected trading house B, which promotes and advertises products A on the market, equipment at a price of 1,900,000 rubles. for a unit. At the same time, the cost of goods amounted to 1 800 000 rubles. for a unit. Calculate the profitability of the sale for A:

1,900,000 - 1,800,000 = 100,000 (profit)/1,900,000 (revenue) = 0.052, or 5.2%.

The interval of profitability for comparable uncontrolled transactions is 20-30%. Thus, for tax purposes A will take into account revenue corresponding to the minimum value of the profitability interval:

1 800 000 • 0,2 = 360 000 rubles, and the transaction price for tax purposes will be equal to

1 800 000 + 360 000 = 2 160 000 rubles.

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