This article examines profit/loss allocation in a headquarter/branch scenario. Part 1, which was published in European Taxation 8 (2015), discussed the actual split between a head office and branch from a theoretical perspective, basic concepts derived from public international treaty law, the notion of Key Entrepreneurial Risk-Taking Functions versus Significant People Functions and the Authorised OECD Approach (AOA). Part 2 continues to analyse the AOA, looks at the question of whether adequate capital is allocated to the branch as a fictitious separate entity and outlines court cases, tax policy and advance pricing agreement/mutual agreement procedure implications.