In the article “The Ghost of DEMPE Past, Present, and Future” published in Transfer Pricing International, Managing Directors Philip de Homont and Vladimir Starkov, Director Tom Braukmann, and Consultants Catarina Branco and Alexis Jin explain how a multinational enterprise (MNE) may split entrepreneurial profits from brands among legal entities based on their “DEMPE” value contributions. They demonstrate a solution to a technically challenging aspect of DEMPE contributions: how to measure the impact of historic DEMPE contributions to a brand’s value today.
Using a case study in which DEMPE value contributions shifted after an acquisition, the authors demonstrate that a newly acquired entity assumed global entrepreneurial functions for the brands over time. They lay out the theoretical framework for ongoing dynamic and perpetual core brand value by mapping specific functions of DEMPE and demonstrating control over financial and operational risks. The authors perform an econometric analysis to determine the perpetual value of a core brand versus dynamic brand values and translate the different economic contributions into shares of license fees.
Published by Transfer Pricing Internation (TPI): https://shop.lindeverlag.at/zeitschrift/tpi-18
