RoyaltyStat Blog

Adjusted COGS is a Proxy for Purchases

Posted by Ednaldo Silva on Oct 30, 2017 5:40:59 PM

Adjusting cost of goods sold (COGS) to remove the effect of one-year changes in inventory is important before determining the arm’s length gross profits resulting from crossborder related-party purchases of goods and services. Adjusted COGS produce also a more reliable measure of the operating profits of the tested party (audited taxpayer) and the selected comparable companies.