FAR analysis mainly determines:

Question

BlackTom AI · Accepted Answer

FAR analysis determines the functional profile and the economic contribution of the parties involved.

Relevant knowledge points and concepts:
- FAR stands for Functions, Assets, and Risks. It is a core diagnostic step in transfer‑pricing and economic analyses to understand who performs which activities (functions), who employs which resources (assets), and who bears which uncertainties (risks).
- The output of a FAR analysis is a detailed functional profile and an assessment of each party’s economic contribution to value creation and profit generation.

Step‑by‑step reasoning:
1. Identify the three components: Functions (what activities are performed), Assets (tangible and intangible resources used), and Risks (commercial, financial, inventory, etc.). These together form the FAR framework.
2. For each party, list specific functions (e.g., R&D, manufacturing, distribution), the assets they use (e.g., IP, plant, working capital), and the risks they bear (e.g., market, credit, product liability).
3. Translate these items into economic roles: who creates value, who exploits intangibles, who takes market exposure. This mapping shows relative economic contribution.
4. Use the findings to decide the appropriate transfer‑pricing method, identify the profit‑bearing entity (e.g., principal vs. agent), and quantify remuneration consistent with value creation.

Why the correct answer is correct:
- A FAR analysis explicitly captures both the functional profile (detailed activities and assets) and the resulting economic contribution (how those functions/assets/risks drive profits). It is designed to do both, not just one.

Why other options are incorrect:
- (a) Functional profile alone is incomplete because FAR also assesses risks and assets and thus economic impact.
- (b) Ownership percentage is not the primary focus; legal ownership may differ from economic contribution.
- (d) Economic contribution alone omits the functional/asset/risk detail required to justify that contribution.

Conclusion: Therefore, option c (Functional profile and economic contribution) is correct, matching the provided answer.

FAR analysis mainly determines:单项选择题

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