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A frequently-proposed [107] [108] alternative to arm's-length principle-based transfer pricing rules is formulary apportionment, under which corporate profits are allocated according to objective metrics of activity such as sales, employees, or fixed assets. Some countries (including Canada and the United States) allocate taxing rights among ...
The two major objectives of FTP in financial institutions are motivating profitable actions and comparable financial performance evaluation among business units, and when properly utilized, transfer pricing systems allow comparable financial performance evaluation of net fund generators and net fund users. [4]
Price discrimination (differential pricing, [1] [2] equity pricing, preferential pricing, [3] dual pricing, [4] tiered pricing, [5] and surveillance pricing [6]) is a microeconomic pricing strategy where identical or largely similar goods or services are sold at different prices by the same provider to different buyers based on which market segment they are perceived to be part of.
The specific functions and principles followed can vary based on the industry. Management accounting principles in banking are specialized but do have some common fundamental concepts used whether the industry is manufacturing-based or service-oriented. For example, transfer pricing is a concept used in manufacturing but is also applied in banking.
In 2015, the G20 supported the transfer pricing recommendations, which aims to guide governments on how profits of multinational companies should be divided among individual countries. Furthermore, the G20 is involved in developing a global tax framework.
When deciding on pricing objectives you must consider: 1) the overall financial, marketing, and strategic objectives of the company; 2) the objectives of your product or brand; 3) consumer price elasticity and price points; and 4) the resources you have available. Some of the more common pricing objectives are: maximize long-run profit
The transactional net margin method (TNMM) in transfer pricing compares the net profit margin of a taxpayer arising from a non-arm's length transaction with the net profit margins realized by arm's length parties from similar transactions; and examines the net profit margin relative to an appropriate base such as costs, sales or assets. [1] [2]
Actions 8-10: Transfer Pricing. Moves to align transfer pricing outcomes with value creation. Creates stronger guidelines to transactions involving the transfer pricing of intangibles and contractual arrangements. [51] Action 11: BEPS Data Analysis
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