RoyaltyStat Blog

Working Capital Adjustments in Transfer Pricing

Posted by Geoff Morris

As a transfer pricing practitioner with many years' experience across many industries and transactions, I’ve heard many reasons for making working capital adjustments (WCA). I’ve seen it described as ‘standard’ or ‘automatic’, as well as ‘unreliable’ and ‘rarely to be performed’. I’ve also heard some describe it as an adjustment they ‘believe in’, or an economic factor that an arm’s length party would ‘always’ take into account in their pricing. To untangle this knot, I’ve set out below some of the issues that I would consider before undertaking a WCA.