Transfer pricing for multinational enterprises. An integrated approach

Diploma Thesis , 2003 , 52 Pages , Grade: 2,0 (B)

Business economics - Accounting and Taxes

Globalization of business has replaced the concept of national exchanges with global transactions. Consequently, the changes due to globalization play a big role in the strategy of multinational enterprises. The volume of intrafirm trade is huge and expanding rapidly as multinationals globalize their investment and trade. Today, a considerable proportion of world trade takes place within multinational enterprises. This indicates the importance of transfer pricing conspicuously.

The intention of this book is to describe the challenge of transfer pricing holistically and to exhibit some options for multinational enterprises determining their transfer prices. While management accounting as well as strategic aspects of transfer prices are also relevant for enterprises, which are not multinational, external aspects (specifically tax accounting) are typically only crucial for multinationals. This book is an attempt to integrate all aspects of transfer pricing targeting practitioners as well as economists.

Inhaltsverzeichnis (Table of Contents)

• 1 Introduction
• 2 Transfer Pricing and Management Accounting
• 2.1 Functions of Transfer Prices in Management Accounting
• 2.1.1 Coordination
• 2.1.2 Performance Evaluation
• 2.2 Types of Transfer Prices
• 2.2.1 Market-based Transfer Prices
• 2.2.2 Cost-based Transfer Prices
• 2.2.3 Negotiated Transfer Prices
• 3 Transfer Pricing and Strategy
• 3.1 Divisional Strategy Implementation with Transfer Pricing
• 3.1.1 Encouraging Divisional Competitive Position
• 3.1.2 The Enforcement of Retrenchment
• 3.2 Strategic Transfer Pricing
• 3.2.1 The Model of Strategic Transfer Pricing
• 3.2.2 Strategic Transfer Pricing and Observable Transfer Prices
• 3.2.3 Strategic Transfer Pricing and Unobservable Transfer Prices
• 3.2.4 Practical and Theoretical Implications
• 4 Transfer Pricing, Multinational Enterprises, and External Constraints
• 4.1 Transfer Pricing for Tax Accounting The Primary Objective
• 4.1.1 The Organization for Economic Cooperation and Development
• 4.1.2 The Determination of Tax Transfer Prices
• 4.1.3 Thin Capitalization
• 4.2 Transfer Pricing and Secondary External Constraints
• 4.2.1 Import Duties
• 4.2.2 Economic Restrictions
• 4.2.3 Currency Fluctuations
• 4.2.4 Withholding Taxes
• 4.2.5 Outside Shareholders of Specific Divisions
• 4.2.6 Paying Taxes and Public Relations
• 4.3 Transfer Pricing and Governmental Considerations
• 4.3.1 Globalization and Tax Competition
• 4.3.2 Political Structures and Regulations
• 4.4 Integrated Multinational Transfer Pricing Management Accounting, Strategy, and External Constraints
• 4.4.1 The Application of Several Books
• 4.4.2 Taking Advantage of Ranges for Tax Transfer Prices for Other Aspects
• 4.4.3 Mathematical Programming Approaches
• 5 Concluding Remarks

Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)

This paper aims to provide an integrated approach to transfer pricing for multinational enterprises (MNEs), encompassing aspects of management accounting, strategy, and external constraints.

• The functions of transfer prices in management accounting
• The strategic use of transfer pricing in MNEs
• The impact of external constraints on transfer pricing decisions
• The importance of integrating various aspects of transfer pricing for optimal decision-making
• The role of globalization and tax competition in transfer pricing policies

Zusammenfassung der Kapitel (Chapter Summaries)

Chapter 1 introduces the concept of transfer pricing and its significance in the context of globalization and intrafirm trade. Chapter 2 delves into the functions of transfer prices in management accounting, including coordination and performance evaluation. It also examines different types of transfer prices, such as market-based, cost-based, and negotiated prices. Chapter 3 explores the strategic aspects of transfer pricing, focusing on divisional strategy implementation and the model of strategic transfer pricing. It discusses how transfer pricing can be used to encourage competition or enforce retrenchment within divisions. Chapter 4 examines the impact of external constraints on transfer pricing decisions, including tax accounting, import duties, economic restrictions, and currency fluctuations. It also analyzes the role of governmental considerations in shaping transfer pricing policies.

Schlüsselwörter (Keywords)

Transfer pricing, multinational enterprises, management accounting, strategy, external constraints, tax accounting, globalization, tax competition, intrafirm trade, divisional strategy, strategic transfer pricing.

• College: Schmalkalden University of Applied Sciences (Economics)
• Course: Cost Pricing und Controlling
• Grade: 2,0 (B)
• Author: Erik Wintzer (Author)
• Publication Year: 2003
• Pages: 52
• Catalog Number: V10822
• ISBN (eBook): 9783638171465
• ISBN (Book): 9783638698108
• Language: English
• Tags: transfer