Setting an arm’s length price is more of an art than a science, and there are relatively few hard and fast rules for determining which method to use, unless the method to be used for particular circumstances is prescribed by the law of the jurisdiction.

In determining the applicable transfer pricing method, once it has been established that the comparable uncontrolled price (CUP) method is inapplicable, most Revenue Services recommend attempting the resale price method or the cost-plus method. Should, for any reason, none of these three methods be applicable, then most Revenue Services agree that there is no hierarchy of preference when it comes to the alternative methods, and that the method most applicable should be the method used.

The methods besides the basic methods may or may not be acceptable in a particular jurisdiction, and one should always check what methods are used locally before attempting to apply a given method.

The OECD Report acknowledges that the basic methods may not always work, and it recognizes that alternative methods exist. However, it expresses reservation about their exclusive use in practice for a variety of reasons, depending on the method. It does however accept that these methods can be used for checking an alternatively set transfer price. Most Revenue Services around the world make provision for the use of these methods and these methods are widespread.