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Transfer pricing issues and measures for performance evaluations

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Explain how important transfer pricing issues are for measuring performance and in the business world. Give an example to illustrate the issues.

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Transfer pricing impacts the prices of items "sold" between units within the same organization. The price of these items sets the "selling price" and the "costs" for the buying and selling units, impacting their unit's profits. So, if the sales price is higher (market price for instance), the performance of the seller looks good and the buyer looks worse (does not get a better than market ...

Solution Summary

Your discussion is 215 words plus an example of transfers at market or cost.

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Transfer Pricing Issues and Measures

Transfer Pricing

1) What is your opinion on the questions below?

Transfer pricing is an important topic from multiple perspectives. It is a global issue affecting taxation, financial results, performance evaluations, and managerial motivation. Ratios are based on the underlying financial information. Transfer pricing is a topic in itself, but it also affects popular financial measures such as EVA (economic value added).

References:

Hiemann, M. and Reichelstein, R. The Dual Role of Transfer Prices in Multinational Firms: Divisional Performance Measurement and Tax Optimization. The European Financial Review. http://www.europeanfinancialreview.com/?p=5741

PWC. (2012). Transfer Pricing. Retrieved from http://www.pwc.com/gx/en/tax/transfer-pricing

Slideshare. (2011). Global Management Accounting. Retrieved from http://www.slideshare.net/costmgmt/issues-in-global-management-accounting-transfer-pricing

Value Based Management.net. (n.d.). Economic Value Added (EVA). Retrieved from http://www.valuebasedmanagement.net/methods_eva.html

REQUIRED:

This module, we'll emphasize transfer pricing issues and measures for performance evaluations. Comment on the importance of these issues, how they are related and why they are very important in the business environment.

Above find some resources for some of these topics that you can use as a starting point. The links are not meant to provide any particular viewpoint, but a mix of resources viewed both from an accounting and a business perspective.

Choose one or two relevant aspects for further investigation and share your knowledge with the class. Try to add information not previously discussed by others. Please, provide factual information (not merely opinions) backed up by details or examples. Your comments should be in your own words and Include references in APA format.

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