VRC Managing Directors Tom Gottfried and Ryan MacLean wrote about how companies must comply with the constantly changing financial and tax reporting requirements to ensure all transactions meet compliance rules in an article, “Transfer Pricing and Valuation in Financial Transactions,” published by Tax Executive.

The piece explains the importance of identifying and using the appropriate valuation standard and methodology when performing a valuation. The different standards, including fair value (FV), the fair market value (FMV), and the arm’s length standard (ALS), may generate different results.

Gottfried and MacLean write, “Given the differences among the FV, FMV, and ALS standards, it is essential to identify the appropriate tax valuation and pricing standard as the first step when valuing financial transactions. If multiple financial reporting and tax valuation and pricing standards must be satisfied, companies should take appropriate steps to ensure consideration of and compliance with all relevant rules and requirements to avoid potential controversy.”