Professional Documents
Culture Documents
Regulations
T ra n s a c tio n s
In te rn a l E x te rn a l
(W i t h i n th e c o u n try ) (o u ts i d e th e c o u n try )
In te r C o m p a n y In tra C o m p a n y In te r C o m a p n y In tra C o m p a n y
Control by ownership
50% of the voting right
Control over composition of board of
directors
Power to appoint or remove the directors
Control of substantial interest
20% or more interest in the voting power
AS-18 and Transactions
Transportation Division:
Revenues: ($23 1,000) $23,000
Deduct costs: ($18 1,000) 18,000
Operating income $ 5,000
What is the Refining Divisions operating
income using the market-based price?
Transfer-Pricing
Methods Example
Transportation Division:
Revenues: ($23 1,000) $23,000
Deduct costs: ($18 1,000) 18,000
Operating income $ 5,000
What is the Refining Divisions operating
income using the market-based price?
Transfer-Pricing
Methods Example
Refining Division:
Revenues: ($60 500) $30,000
Deduct costs:
Transferred-in ($23 1,000) 23,000
Division variable ($8 500) 4,000
Division fixed ($4 500) 2,000
Operating income $ 1,000
Transfer-Pricing
Methods Example
Refining Division:
Revenues ($60 500) $30,000
Deduct costs:
Transferred-in ($20.16 1,000) 20,160
Division variable ($8.00 500) 4,000
Division fixed ($4.00 500) 2,000
Operating income $ 3,840
Transfer-Pricing
Methods Example
Goal congruence
Management effort
Subunit autonomy
Market-Based Transfer
Prices