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  • Transfer Pricing

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    Atheena Das
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    Transfer pricing is the rates or prices used when transferring goods or services between divisions of a company or between a parent company and subsidiary. Transfer pricing can help efficiently manage profit and loss ratios and simplify the process of moving goods internally. The transfer price may include the original purchase price or a reduced price, and can also include shipping costs to help consolidate shipping discounts. Transfer pricing streamlines the internal transfer of goods by reducing accounting paperwork compared to external purchases. Some countries regulate transfer pricing to prevent tax evasion or other unethical uses.

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    Transfer pricing is the rates or prices used when transferring goods or services between divisions of a company or between a parent company and subsidiary. Transfer pricing can help efficiently manage profit and loss ratios and simplify the process of moving goods internally. The transfer price may include the original purchase price or a reduced price, and can also include shipping costs to help consolidate shipping discounts. Transfer pricing streamlines the internal transfer of goods by reducing accounting paperwork compared to external purchases. Some countries regulate transfer pricing to prevent tax evasion or other unethical uses.

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    12 views1 page

    Transfer Pricing

    Uploaded by

    Atheena Das
    Transfer pricing is the rates or prices used when transferring goods or services between divisions of a company or between a parent company and subsidiary. Transfer pricing can help efficiently manage profit and loss ratios and simplify the process of moving goods internally. The transfer price may include the original purchase price or a reduced price, and can also include shipping costs to help consolidate shipping discounts. Transfer pricing streamlines the internal transfer of goods by reducing accounting paperwork compared to external purchases. Some countries regulate transfer pricing to prevent tax evasion or other unethical uses.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
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    Transfer pricing

    Transfer pricing is the rates or prices that are utilized when selling goods or services between company divisions and
    departments, or between a parent company and a subsidiary. The transfer pricing that is set for the exchange may be
    the original purchase price of the goods in question, or a rate that is reduced due to internal depreciation. When used
    properly, transfer pricing can help to more efficiently manage profit and loss ratios within the company. Generally,
    transfer pricing is considered to be a relatively simple method of moving goods and services among the overall
    corporate family.

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    In situations where the transportation of goods is involved in the transaction, the transfer pricing may include both a
    fixed price per unit transferred, plus additional charges to cover the cost of shipping. This model is especially helpful
    when the transfer takes place between a parent company and a subsidiary. The larger entity can arrange the shipping
    through a discounted shipping plan that the smaller entity may not be able to access. The end result is that the transfer
    pricing makes it possible to move the goods with the smallest amount of expense to the company as a whole.

    In addition, transfer pricing is a great way to move goods from one company division or department to another
    without generating a lot of postings on the Accounts Receivable and Accounts Payable books. The value of the goods
    is simply moved from one division to the other, a process that greatly simplifies the process. Normally, there is a
    simple form that accompanies the physical transfer of the goods, and is used by both the sender and the recipient to
    make appropriate posts in company accounting records. This process eliminates the necessity for invoices, tariffs,
    internal bills of lading, and other documents that would normally apply to a new purchase using an outside vendor.

    While the main purpose of transfer pricing is to enhance the overall value of the corporate family of companies, there
    are instances when this type of transaction can be abused. This is especially true when transfers to international
    locations are conducted. Today, many countries have regulations to help prevent the use of transfer pricing as a means
    of evading taxes or similar unethical and illegal activities.

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