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L13 TP Mkt Based Method

L13 TP Mkt Based Method

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Published by: api-3820619 on Oct 18, 2008
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03/18/2014

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Transfer Pricing \u2013 The Concept
Transfer Pricing \u2013 The Concept
10/17/08
10/17/08
hmahesh45@yahoo.com
hmahesh45@yahoo.com
1
1
Division A
Division A
* Div A\u2019s Output is Div B\u2019s Input,
and A supplies the product to B
ABC Co Ltd.
Division B
Division B
Division C
Division C
* And method followed to arrive at TP is called
Transfer Pricing
* Value charged by Div A to Div B is called
Transfer Price.
* It is a transfer transaction and not a sale
transaction in its pure sense.
How am I concerned with TP?
How am I concerned with TP?
10/17/08
10/17/08
hmahesh45@yahoo.com
hmahesh45@yahoo.com
2
2
\u25cf Objective of MCS is to measure and evaluate
and if needed control the managerial actions/decisions.

\u25cf Usually the profit is the best measure of the
performance of any business unit &
is a prime function of Price

\u25cf Inappropriate/discretionary pricing for
inter-divisional transfer of good/services draws
a wrong performance picture.

\u25cf Hence appropriate pricing policy helps in
ASSESSING THE REALISTIC PERFORMANCE of the division.
\u25cf Hence a well-established TP acts as a tool of
Managerial Control in itself.
10/17/08
10/17/08
hmahesh45@yahoo.com
hmahesh45@yahoo.com
3
3
Significance of TP
Si
\u25cf To measure the Real Performance and
Profitability of the division.
\u25cf To allow Autonomy to divisional functioning
without subverting the firm\u2019s goal.
\u25cf To Achieve Goal Congruence .
\u25cf To keep up motivation of all concerned
divisions.
\u25cf To ensure the cost control at every division.
gnificance of TP

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