IAS General Studies Prelims Question No. 106

A transaction between two subsidiaries of the same parent organization could only be said to be at "arm’s length" if it could be shown that __:
[A] Subsidiary was given some kind of preference
[B] Subsidiary was kept at par with unrelated companies
[C] Subsidiary was created only for the transaction to be completed
[D] Subsidiary and Parent organizations share the employees
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[B] Subsidiary was kept at par with unrelated companies
Arm's length denotes a transaction in which the parties to the transaction are or behave as if they are unrelated parties. For example, a transaction between two subsidiaries of the same parent organization could only be said to be at arm’s length if it could be shown that the deal had been carried out at current market prices with no preference of any kind being shown in the trading terms.

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