The implementation of IFRS 18 introduces fundamental changes to the definition and measurement of operating profit, which significantly impact multinational enterprise transfer pricing practices. Unlike broader IFRS-related issues, such as the general harmonization of account-ing standards across jurisdictions, the redefinition of operating profit under IFRS 18 is specifically designed to amalgamate both recurring and non-recurring items. This shift creates unique challenges for transfer pricing methodologies, particularly in the application of the Trans-actional Net Margin Method (TNMM) and Profit Split Method (PSM), where stable and consistent profit measurements are crucial. Using the PRISMA guidelines, the study employs both qualitative thematic analysis and quantitative content analysis to identify patterns and rela-tionships between the evolution of accounting standards and the reliability of transfer pricing across multiple academic databases and peer-reviewed publications. The research reveals that IFRS 18's residual approach to operating profit determination creates substantial volatility in profit level indicators fundamental to transfer pricing applications. The Transactional Net Margin Method faces critical vulnerabilities due to its dependence on stable operating profit measurements, while the Profit Split Method demonstrates greater resilience but requires enhanced complexity management. Cross-jurisdictional implementation disparities create additional challenges as different countries adopt IFRS 18 at varying timelines and with local modifications, undermining comparability analyses essential for transfer pricing applications. The study identifies significant regulatory coordination gaps, where major jurisdictions develop inconsistent guidance approaches, creating substantial implications for multinational enterprise compliance strategies and dispute risk management. The findings conclude that IFRS 18 implemen-tation necessitates fundamental adaptations to established transfer pricing methodologies and enhanced coordination between accounting standards and transfer pricing regulatory development to maintain system integrity and effectiveness.
Han et al. (Fri,) studied this question.