During a conference organized by the Centre for Transfer Pricing "chain of value creation in the context of TP" - there were questions about the profit split method in the framework of the valuation of intangible assets.

Questions were so reasonable that departs from the OECD to promote CUP, because after two years of work finally noticed that not only the intangible assets are not comparable in practice, but this problem also applies to, e.g., equity instruments, and generally speaking traders. The comparative method is as I understand it now unfashionable !. Therefore, we move away from the comparative method in the market approach, and it is not worried that we are going worse striding toward the DCF method.

 In 2012. During the discussion on the draft amendments to the chapter. VI conference in Paris experienced almost a shock when persuaded us to intensively methods CUP and even invited for those purpose representatives of commercial databases royalties Royaltysource and ktMINE.

I realized that trying to squeeze intangible corset standard methods for determining transaction prices, confusing the way the issue of evaluation of the potential problems of determining the market price.

Now he tells me that I have to use any method of pricing as long as meet the principle of AL and stands out in an exhaustive TPG DCF method, this method devoting a lot of attention.

In my opinion, forget about the most important. The DCF method is not used for pricing or colloquially speaking to the pricing of, the DCF method is used to determine the value, and in this context, this approach is the most one-sided.

I look forward, therefore, when the OECD change vocabulary or clarify that it must be clearly distinguished two concepts of pricing and valuation. The case is only seemingly trivial; it would seem that the name speaks for itself, TPG is finally Transfer Pricing guidelines. If, however, we reflect on the essence of the principle of AL, which for now applies to conclusions could be fascinating.

We have developed methods for the valuation of intangible assets (i.e., determining the "intrinsic value"). TPG offers us so far been very poorly described method Profit Split, which is used to establish transaction prices in the context of the AL about these particular goods, and a well-defined method of CUP, which is almost not applicable due to the large information requirements (any rule of thumbs). In the way of grace, we told the proverbial "do what you want" as long as meet the AL - and fortunately it that much.

Personally, I see the possibility of the use of prostheses aptly named Profit Split, taking into account as described in the TPG transaction context but totally do not see how I apply the method DCF valuation for purposes of determining the transaction price, to which this method is not suitable?

That is why I said at the Conference of interesting seminar P. T. "Price and Value," a recognized expert in the valuation of  Aswath Damodaran May 2014.

It should call things correctly and not say that the Profit Split is used for the valuation of intangible assets. Anyway, good to Sli for the next two years, CUP method will return to favor.

It is also worth noting the provisions of par. 188 - 191 "Revised TPG" of 07.30.2013 r. In the context of this method of valuation. In any translation - "neither the tax authorities nor the taxpayers should not assume that the discount rate should always be determined by applying a WACC or any other measure."

This provision was also maintained in the version of Chapter VI of TPG in the BEPS (Action 8) in par. 197 -170.

WACC was called up to the plate, and that this measure is the result of the analysis of the CAPM model, so I enclose a link to an absorbing article under the telling title "CAPM: An Absurd Model" http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2505597 

How to determine the discount rate, which will be as little controversial is very timely, especially when BEPS issue of risk is changing through all possible cases, not to mention the ambitious tasks "intangibles - ownership, hard to value" and "Risk, recharacterisation ."

The first example from the shore - setting the discount rates for the valuation of the portfolio of patents and know-how at an early stage of commercialization - shows the determination of the discount rate for the financial account, in this case, is always debatable. Valuation is the area of art, something for the "old-timers" which is entered into a large number of such transactions and has a nose.