In the last 30 years, a debate has been raging in international tax circles between advocates of the OECD Transfer Pricing Guidelines and the arm’s length standard (ALS) they embody, on the one hand, and advocates of formulary apportionment (FA) on the other. After the adoption of the 1995 regulations and the new OECD Guidelines, the debate became quieter for a while, because everyone was waiting to see whether the issue had been resolved. However, while there have been few decided cases, it is clear by now that the transfer pricing problem is as bad as it ever was. That is why my co-authors Kimberly Clausing and Michael Durst and I have recently re-proposed adopting FA. However, it is unlikely we will persuade advocates of the ALS and in particular the OECD that FA is the way forward (although this may change if the Obama administration were to press the issue, or if the European Union adopts CCCTB). Thus, I would like to propose a compromise: Use FA in the context of the ALS. Specifically, I would suggest using FA to allocate the residual profit in the profit split method. This article is devoted to (a) explaining the drawbacks of ALS as currently applied, (b) developing the above proposal, and (c) concluding with a plea for further discussion by both sides of the FA/ALS debate.