What are the main approaches for setting transfer prices? How can the problems that these approaches create be reconciled between the selling and buying divisions?© BrainMass Inc. brainmass.com June 4, 2020, 3:53 am ad1c9bdddf
Transfer prices are set usually based on performance policy (what gets rewarded) or tax minimization (shifting profits to low tax areas). The approaches generally include:
At Cost - this keeps all profits in transaction with outside parties at market rates and doesn't require any elimination of intra-company profits during financial statement ...
Your tutorial is 188 words and a reference and discusses three major approaches, cost, negotiated and market.