You know what grinds my gears – CPM v TNMM

You may have seen from my updated LinkedIn profile that I have changed jobs and that is part of the reason why I have not posted in a while. Another reason is that the transfer pricing world has just become so much more evolved lately and there is just so much to do to keep up with it all.

I thought in order to keep this blog fun but yet applicable to a transfer pricing enthusiast such as yourself I would start a “grinds my gears” section. Please note as always these are my views and opinions and not those of my employer.

gearYou know what grinds my gears? When people use the terminology Cost Plus for either a method or PLI interchangeably. As you know the one is a transfer pricing method (i.e. Cost Plus Method / CPM) and the other is a profit level indicator used as part of another method, the Transactional Net Margin Method (TNMM). Yes you may be applying a cost plus principle for both (when selecting a return on total cost / mark-up on total cost for the TNMM) but the one is at a gross level and the other at a net level. Too many times have I seen this confusing too many people.

Please note the CPM in this context is not the comparable profits method as per the U.S. rules

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