Another topic I don’t enjoy teaching (it’s not really Management Accounting!). In reality this is only an issue because careful allocation of costs allows companies with an international structure to manage their tax liabilities.
Having said that, there are a number of terms/techniques that will be familiar to Management Accountants. I wish they wouldn’t pinch space out of our syllabus though – stick it in Tax where it belongs!
Watch these.
A good introductory presentation to the principles of Transfer Pricing.
An introduction to the principles of Transfer Pricing .
American video, so the references to taxation are obviously to US rules, but a good explanation of the bases on which the prices are actually determined. this is more Management Accounting than Tax.
This video talks about the Management Accounting principles involved.
But the reality is that it is about tax mitigation (a posh word for reduction).
Read this.
Attempts to restrict the use of Transfer pricing to avoid tax.
A bit of a crackdown on the use of methods for artificially shifting profits to countries with lower tax regimes will have an impact on Transfer pricing.
Will it work though?
Possible Written Questions.
(No indication of marks – the more marks a question gets, the more you are expected to write – detail that is, not just words!) If you can’t answer these, you need to do some more reading. I do ‘find’ questions elsewhere, so these aren’t all questions I have used myself.
Comment on the following approaches to the calculation of Transfer Prices: Market Based, Cost Based, Negotiated, Administered.