Introduction

Despite being a technical process, benchmarking can be more art than science. Here we discuss the practical hurdles and how to overcome them.

Challenges

• Lack of data on comparable companies in niche sectors

• Highly integrated or bundled transactions

• Transactions involving intangibles or intra-group services

• Dispute over use of filters or selection criteria

• Tax authority rejection of economic adjustments

Solutions

• Use of industry insights and expert judgment

• Supplementing with internal comparables wherever possible

• Justifying use of regional / global comparables in absence of local data

• Transparent documentation of all assumptions and filters

• Seeking APAs to avoid prolonged litigation

Conclusion

Benchmarking is not just a mechanical process it’s a strategic. A defensible, well-documented benchmarking study can save years of dispute and litigation.