sold to an external customer, but no sales commission if goods are transferred to the Glass Bottles Division. In these circumstances the opportunity cost of making the transfer is reduced to (? 55 -? 3 =? 52). The optimal transfer price is reduced accordingly.
. Strategic considerations: For strategic reasons a company may require its divisions to trade with each other even where external markets exist. For example a company such as Volkswagen may not wish its engines manufacturing division to sell its engines to rival car manufacturers, and may require that its car manufacturing division uses engines produced within the Volkswagen Group. In other words although external markets for engines exist, the company (for strategic reasons) the company does not wish the divisions to use them. [16] pricing mechanisms which rely on external market prices (as in Scenario 1 above) clearly will not work in this situation. One solution is for the selling division (ie, the engines manufacturing division in this example) to be paid the marginal cost for each engine (which is the optimal transfer price since there is no opportunity cost) plus a lump-sum fixed annual fee ( to enable the division to cover its fixed costs and show a profit).
Conclusion
is basic direction development of all spheres of life, including industrial. Open border, free exchange a commodity, an intellect, technologies and information, is by pre-condition of origin of high standards and strong market competition. It forces modern enterprises and organizations of the whole world to answer these criteria. Terms, functioning of modern economy, that characterized by a keen competition, require from guidance the companies of permanent modernisation of business processes of enterprise, use of innovative technologies.effective transfer pricing is one of the reasons of multinational corporations `effective competition on the market . pricing is the set of mechanisms which is used to attach prices to goods or services which are traded between two divisions of the same company. The classic example involves one division (the selling division, or SD) which produces a component which is required by another division (the buying division, or BD). The component is used by the BD in the manufacture of a product which it sells on the open market. this work it was noticed that every big company has effective serious transfer pricing policy, different scenarios, methods and principles. It was clearly shown with the help of Crystal Ltd company example.
References
1. Pitelis, Christos; Roger Sugden (2000). The nature of the transnational firm.
. Doob, Christopher M. (2013). Social Inequality and Social Stratification in US Society. Upper Saddle River, NJ: Pearson Education Inc.
. Jump up Gio Wiederhold (2013): Valuing Intellectual Capital, Multinationals and Taxhavens; Springer Verlag, August 2013.
. Jump up Michel Aujean (chair) (2001): Company Taxation in the Internal Market; Commission of the EC, 23 Oct 2001
. Jump up Ronen Palan (2010): The Offshore World: Souvereign markets, Virtual Places, and Nomad Millionaires; Cornell University Press, 2006.
. Jump up Several websites provide overviews of transfer pricing regulations by country, such as the Country References on the TPanalytics websit...
