Transfer pricing based on comparables is the foundation of the U.S. Treasury Regulations (“Treas. Reg.”) § 1.482 (published in 1994, as amended), the OCED Transfer Pricing Guidelines (1995, 2010), and several other country-specific transfer pricing regulations around the world.
In theory, the Treas. Reg. § 1.482 and the OECD Guidelines list five factors of comparability with a pretty nomenclature that read objective and reasonable. They are characteristics of property or services, functions performed, contractual terms, risks assumed, and economic conditions (geographic market).