Segue a reliable method to determine the arm's length profit margin of each selected comparable company to benchmark the tested party. For each selected comparable company, we measure Total Costs (Lato) = COGS + XSGA + (DP – AM). In Standard & Poor's Global (Compustat) mnemonics, COGS is cost of goods sold, XSGA is operating expenses, DP is the depreciation of property, plant & equipment (PPENT), including AM that is the amortization of acquired intangibles. Denote C as Total Costs (Lato) and S as Net Sales, which for each selected company is the sum of the unit price of the individual goods and services offered by the enterprise during the fiscal year multiplied by the respective quantity supplied:
(1) S(t) = C(t) + P(t)
for t = 1 to T fiscal periods.