An Arm’s Length Transaction


Ajit Kumar AJIT KUMARWISDOM IAS, New Delhi.



     Arm’s Length Transaction /Inter-Firm trade

An arm’s length transaction describes business deals in which the buyer and seller act independently and with no interest in the other’s benefit.

Basis of determining fair market value (FMV), it is a dealing between independent, unrelated, and well informed parties looking out for their individual interests. Transactions involving family members, and parent companies and subsidiaries, are deemed arm-in-arm dealings. To qualify as an arm's length transaction, neither of the involved parties may have any interest in the transaction's consequences to the other party.

When two parties engage in an arm’s length transaction, acting solely on their own interest and with equal access to information, there is a reasonably good chance that the sale price of the asset will be close to its fair market value.
This term is regularly used in real estate, where finding fair market value is extremely important to many parties, including those outside the deal, like lenders.


Intra-Firm Trade

Intra-firm trade consist of trade between parent companies of a compiling country with their affiliates abroad and trade of affiliates under foreign control in this compiling country with their foreign parent group.







Thursday, 29th Jun 2017, 06:24:37 AM

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