Comparable sales method, valuable trademark & unrelated distributors
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1. USM, a US manufacturing corporation, sells electrical gizmos to foreign distribution subsidiaries and to unrelated foreign distributors. The terms of sale are substantially the same except that the price charged to subsidiaries is a delivered price, while the price charged to unrelated distributors is FOB USM's factory. Is the comparable sales method applicable in this case?
2. Would your answer in Problem 1 change if the sole difference was that USM affixes its valuable trademark to electrical gizmos sold to its subsidiaries, but not to unrelated distributors?
3. Would your answer in Problem 1 change if the sole difference was that subsidiaries resold to European customers while the unrelated distributors sold in Asia?
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Solution Summary
This solution discusses how applicable the comparable sales method is in the case of USM, their valuable trademark and their unrelated distributors.
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Question 1
First, the comparable sales method is the valuation of a transaction based on the price of a similar transaction. As regards the case, this method is NOT applicable as both situations are not similar. It is likely that USM sells the electrical gizmos to its foreign ...
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