In the context of transfer pricing,what is an arm's-length transaction?

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An arm's-length transaction is a transaction in which the price is set by the market and the interaction of each party attempting to get the best possible price from their perspective. It is a transaction between two independent and unrelated parties, who act in their own self-interest, without any undue influence or related party relationship. The arm's-length principle requires that transfer prices be set based on market prices for comparable goods or services, and that the prices must be determined in a manner that accurately reflects the true economic value of the transaction.

In the Context of Transfer Pricing,what Is an Arm's-Length Transaction