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NERA assists clients in establishing fair and accurate valuations of businesses and/or intellectual property associated with business reorganizations, tax planning, or mergers and acquisitions.
Appropriate valuation analyses that are consistent with the arm’s length principle require rigorous and defensible application of entity-level or asset-level valuation techniques that recognize underlying economic and market conditions. To make sound forecasts, it is important to understand the dynamics of the marketplace. This is the hallmark of NERA’s approach—one that has been successfully employed for clients seeking an accurate measure of business or intellectual property value.
NERA assists MNCs in this area of compliance and tax planning by performing robust and defensible royalty rate evaluations that make appropriate use of both benchmarking and income-based valuation methods for establishing intercompany royalty rates.
i. Comparable Transactions
The comparable transactions method is a widely used approach that produces reliable results if certain comparability criteria are met. Among those criteria are comparability with respect to the intangible property transacted and the profit potentials of the licensor and licensee.To achieve reliability when using this method, a sufficiently high level of comparability between the unrelated and related party transactions must be obtained. Information on unrelated party transactions comes from two broad types of comparable analyses:
- Licensing agreements between a related tested party and unrelated parties. Information on these agreements is typically provided by the client.
- Licensing agreements among entities unrelated to the tested party. These agreements are typically obtained from databases maintained by third-party providers.
NERA economists have access to an extensive array of licensing databases whose scope goes beyond the data compiled from filings with the US Securities and Exchange Commission, including franchising associations and national and regional intellectual property offices outside the US. We often supplement this data with financial information from the licensees and licensors to further support the comparability of the unrelated party transactions.
ii. Profit Split Methods
NERA economists have assisted clients by using a variety of profit split methods including:
- Comparable Profit Split Method. This method relies on the application of the profit split results observed in transactions among unrelated parties to the related party transactions.
- Residual Profit Split Method. This method relies on categorizing functions, risks, and assets between "routine" i.e., those whose returns are determined by economic benchmarking, and “non-routine” or “entrepreneurial,” i.e., those whose remuneration is computed as a residual profit. The residual profits are split between the parties based on an appropriate allocation principle.
iii. Other methods
Additional methods that can be used to determine arm’s length royalty rates include a cost approach that relates the value of intangible to the economic cost of its development, and utilizing the values of comparable intangible assets produced for accounting purposes or obtained from specialized studies. Trademarks are an example of intangible assets where such method can be applied. Once a range of asset or equity multiples related to trademark valuations is determined, it can be applied to the asset or equity value of the tested party to determine the range of the values of the trademark in question.The alternative valuation methods can be used as supporting analyses and in situations that call for reconciling the market valuation of intangible assets with their internal valuation.
Name | Title | Location | Phone | |
---|---|---|---|---|
Dr. Yves Hervé | Senior Managing Director | Frankfurt | +49 69 710 447 508 | yves.herve@nera.com |
Dr. Harlow Higinbotham | Senior Managing Director | Chicago | +1 312 573 2803 | harlow.higinbotham@nera.com |
Dr. Emmanuel Llinares |
Senior Managing Director
Head of Global Transfer Pricing |
Paris
Geneva London |
+33 1 70 75 01 93
+41 22 819 94 94 +44 20 7659 8650 |
emmanuel.llinares@nera.com |
Philip de Homont | Managing Director | Frankfurt | +49 69 710 447 502 | philip.de.homont@nera.com |
Dr. Niraja Srinivasan | Managing Director | Washington, DC | +1 202 466 9290 | niraja.srinivasan@nera.com |
Dr. Vladimir Starkov | Managing Director | Chicago | +1 312 573 2806 | vladimir.starkov@nera.com |
Tom Braukmann | Director | Frankfurt | +49 69 710 447 511 | tom.braukmann@nera.com |
Amanda Pletz | Director |
London
Paris Geneva |
+44 20 7659 8528
+33 1 70 75 01 85 +41 22 819 94 94 |
amanda.pletz@nera.com |
Alexis Jin | Consultant | Chicago | +1 312 573 4804 | alexis.jin@nera.com |
Mark L. Berenblut | Affiliated Consultant |
Toronto
New York City London |
+1 416 868 7311
+1 917 475 0020 +44 20 3769 1096 |
mark.berenblut.affiliate@nera.com |
Dr. Alexander Voegele | Affiliated Consultant | Frankfurt | +49 69 710 447 501 | alexander.voegele.affiliate@nera.com |
Title | Date | |||
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What is on the Transfer Pricing Horizon? | 04 March 2022 | |||
Increasing Transfer Pricing Litigation for Multinationals Operating in Europe | 30 March 2021 | |||
Global Transfer Pricing Forum 2020 | 01 December 2020 | |||
IFA New England Fall Conference | 05 November 2020 | |||
TP Minds International 2020 | 01 September 2020 | |||
Life Sciences Accounting and Reporting Congress | 10 August 2020 | |||
Keeping Your International Tax Structure Healthy During a Pandemic | 29 July 2020 | |||
Advanced Transfer Pricing Course at Leiden University | 23 February 2020 | |||
2020 Global Transfer Pricing Conference: Transfer Pricing Developments Around the Wor... | 19 February 2020 | |||
Lecture on Economic Regulation of Natural Monopolies and Optimal Design of Intellectu... | 04 February 2020 | |||
Title | Date | Type | ||
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Horst Frisch Economists Join NERA’s Transfer Pricing Practice | 13 September 2022 | Press Release | ||
NERA Expert Recognized as a Leader in Tax by ITR World Tax | 12 September 2022 | Press Release | ||
Horst Frisch Joins Forces with NERA | 18 July 2022 | Press Release | ||
NERA Experts Promoted to Associate Director, Senior Consultant, and Consultant | 23 March 2022 | Press Release | ||
NERA Corporate Tax Expert Recognized in Who’s Who Legal 2021 | 01 October 2021 | Press Release | ||
NERA Director Philip de Homont Listed in Rising Stars Expert Guide 2020 | 22 February 2021 | Press Release | ||
Global Transfer Pricing Expert Joins NERA Economic Consulting | 10 September 2020 | Press Release | ||
Steadfast in Uncertain Times: How NERA Is Responding | 16 April 2020 | Press Release | ||
NERA Economic Consulting Opens Office in Milan, Italy | 19 November 2019 | Press Release | ||
Who’s Who Legal Recognizes 28 NERA Experts in 2019 Consulting Directory | 30 July 2019 | Press Release | ||