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P. GURU PRASAD
FACULTY
INC GUNTUR
Evaluating Management Control Systems
Lead to rewards
Monetary Nonmonetary
The concept of Transfer Pricing
Definition
A transaction between two related or
affiliated parties that is conducted as if
they were unrelated, so that there is no
question of a conflict of interest. Or
sometimes, a transaction between two
otherwise unrelated or affiliated parties.
Organizational chart Board of Directors
Of
GAC
president
Chrome Laundry
Electric Electric
Product Equipment
Motor Stove
division division
division division
Gear Miscellaneous
And Stamping Refrigerating Appliance
Transmission division division division
division
Minimize Tax Liability
For organizations operating in many countries,
internal transfer pricing can be a determinant
of where profits are to be declared and taxes
paid. The fact that different countries have
different tax and exchange rates has to be
taken into consideration case of transactions
with sister concerns that supply intermediary
products.
Ideally the transfer pricing policy should
enable multinational corporations to minimize
tax liability
TP objective in International Business
24
Market-Based Transfer Prices
Companies heavily
committed to segment
autonomy often allow
managers to negotiate
transfer prices.
Negotiated Pricing Method
39
Implementing the TP