In this episode of Uncontrolled Opinions, we explore the pros and cons of using public and private company data in the context of a TNMM or CPM analysis in transfer pricing.  We discuss practical aspects such as data availability, quality, reliability, the impact of size and operating leverage, and the importance of functional comparability in selecting comparable companies. We also cover practical considerations, from regulatory compliance challenges across jurisdictions to best practices for global benchmarks. Whether you're navigating data complexities or refining your benchmarking approach, this episode offers valuable insights for enhancing economic analysis in transfer pricing.Key Points CoveredData Availability and Regulatory Impact Public Companies: Public companies are generally required to disclose detailed financial information to meet investor transparency standards, making them a reliable primary source for benchmarking. Private Companies: Reporting requirements for private companies vary across regions. For instance, UK regulations mandate private companies to disclose financials, whereas in the U.S., many private companies are not obligated to release financial information.Quality and Reliability of Data Public Company Data: Mikhail emphasizes the advantage of using public company data, highlighting the role of regulatory bodies like the Securities and Exchange Commission (“SEC”) in ensuring the integrity and transparency of financial reports..  Public companies also offer comprehensive details, such as annual reports and segmented financial data.Private Company Data: Silvana points out that private companies can provide better comparability in terms of size, especially when benchmarking smaller subsidiaries. However, data inconsistencies and potential biases stemming from ownership and management overlap can pose challenges Size and Functional Comparability Importance of Size: Public companies are typically larger, which may not be directly comparable to smaller subsidiaries. Operating Leverage: Mikhail discusses how company size affects profitability through operating leverage, with fixed costs impacting larger firms differently.Functional Activities: Functional comparability is crucial, sometimes more so than size.Practical Considerations for Benchmarking Sample Composition: A well-balanced mix of public and private companies can create a more robust benchmarking analysis. Regulatory Compliance: Benchmarking across multiple jurisdictions involves navigating diverse regulatory requirements, from independence standards to control parameters. Designing a compliant search strategy across different countries can be complex but is essential for robust benchmarking. Best Practices for Global Benchmarks Purpose-Driven Approach: Clearly defining the purpose of the benchmarking—whether for documentation, planning, or compliance— can guide the methodology effectively.Multiple Data Sources: Combining different commercial databases may be necessary to gather sufficient public and private data.Flexibility: Be prepared to adjust criteria based on jurisdictional preferences and data availability. 

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