What is transfer pricing
Transfer prices are determined by way of calculation and are valuations for in-house services. Especially in the case of organizationally separate corporate areas that are responsible for their costs (cost center) and possibly the share of the return generated for the company (profit center). In companies whose cost accounting is designed as planned cost accounting, the future material consumption quantities are usually assessed at fixed internal transfer prices.
is a cost value with which the quantitative consumption is evaluated in the cost accounting over a longer period of time. The transfer price is not future-oriented (see plan transfer price), but related to the present, which does not exclude that it can be identical in value to the plan transfer price. The difference to the plan transfer price becomes clear, however, in that the transfer price represents the value component of the actual and normal costs, while the plan transfer price is to be understood as a value component of the plan costs.
Either the consumption or cost price can be used as the transfer price for material goods; for work, the gross amounts per time unit including the associated social costs. With the application of a transfer price, the external price influences on cost accounting should be eliminated.
Transfer prices are prices with which the services are set within a company. The determination and setting of transfer prices is always necessary if, for example, a department of a company renders services for another department of the company or a company gives or accepts services to another company within a group of companies. Comparable market prices are used to determine transfer prices. If these are not available, the costs caused by the service, possibly plus an imputed profit surcharge, are used as a basis.
1. Above all as offset interest. Internally assigned value or price that is used to evaluate and offset bank-internal transfers of services. Transfer prices serve to simplify bookkeeping and calculation, have a control and success determination function, but serve in particular for guidance or control in decentralized companies such as banks. They also have a motivational function. The setting of transfer prices in the context of profit center control can take place as market, cost-oriented transfer, scarcity, negotiation prices. In the case of transfer prices with a control function, the following are possible: cost, benefit and / or market-oriented transfer prices. 2. Average price for a unit of a cost object in the bank plan cost accounting.
The term transfer price should be used very restrictively in the sense of a clear delimitation. Transfer prices enable the billing of the exchange of services between interlinked companies or business divisions. If services are exchanged between cost centers, one speaks of internal cost allocation.
In the area of group cost accounting, there is a particular problem that the group company purchasing a goods / service takes over the cost price from the sister group company in terms of the use of materials. At the supplying group company, however, there is a cost stratification and also a calculated profit that is not visible to the recipient. In the interests of group transparency, the central department group controller would have to ensure that the cost types can be broken down in the calculations so that consolidated material inputs, wages etc. are visible.
In contrast to market prices, transfer prices (also planned prices) are not based on supply and demand; they are much more determined internally by company management in order to achieve certain goals. The purpose of the invoice determines the amount of the transfer prices to be applied.
(1) If the sole purpose of the invoice is to eliminate price fluctuations on the procurement markets, the average cost price expected during the year is to be used.
(2) If the purpose of the invoice consists exclusively of the computationally correct completion of the internal accounting for services, z. B. to use the plan cost rates resulting from the application of the equation procedure for the in-house services.
(3) If the control function dominates the billing purpose, market prices are to be selected as transfer prices.
In the practical case, there are usually several billing purposes to consider. The following rules are used to determine transfer prices:
* Plan prices or transfer prices should be fixed for at least one year; However, this does not rule out short-term adjustments to transfer prices in special cases.
* Transfer prices should be realistic, i.e. H. correspond roughly to the market prices in order to uncover internal inefficiencies.
* Transfer pricing should also take future expectations into account.
are prices that a company determines for itself in order to evaluate deliveries and services that parts of the company provide to each other (divisional organization). In cost accounting, they fulfill the purpose of uniform consideration independent of market price fluctuations in the so-called plan cost accounting
Transfer prices (also: transfer prices) are valuations that are determined in a company to evaluate the quantities of goods consumed by internal accounting units (cost centers, departments, preliminary and end products, etc.). The purpose of the valuation determines the level of transfer pricing.The main purposes of transfer pricing are:
1. Delimitation of price fluctuations in cost accounting. By applying fixed transfer prices, price fluctuations can be neutralized. This is v. a. This is important for the control of the profitability of cost centers, since cost deviations, which are based on fluctuations in market prices or cost deviations of other positions providing in-house services, can be differentiated from employment deviations and the particularly interesting consumption deviations.
2. Determination of the success to be shown in externally oriented information invoices. Here are v. a. two aspects to be considered: Within the framework of the principles of proper bookkeeping and (in the case of AG) the strict lowest value principle, assumptions can be made about the order in which certain goods in the inventory are consumed: the (Lifo, Hifo, Fifo etc.) cause used supplies. When using Lifo and increasing stock prices, high costs are added to the products sold via high transfer prices, which reduce the reported profit. In corporations there is also the problem of evaluating intra-group deliveries and services. High transfer prices increase the profit of the supplying company and vice versa. In the case of cross-border intra-group transactions, the transfer pricing has an influence on the amount of the profits reported in the individual countries, on the amount of tax revenue in the various countries and, in the case of different tax rates, also on the amount of taxation of the group profit. As far as possible, the control of these transfer prices is based on the market prices of comparable goods.
Determination of area successes for internal planning. In the case of corporate divisions that are not only in contact with external markets, the use of transfer prices for internally procured or delivered goods enables divisional successes to be shown. Apart from the aspects of decentralized decisions that are dealt with in more detail under »Pretial control, area successes determined according to the cause can be the basis of central decisions (e.g. closure of the area).
See also: transfer prices
Group transfer pricing, elimination of interim profits
(Transfer prices, steering prices; general characterization) are values that are used in a company for services that are exchanged between organizational areas (divisions, divisions). Often the organizational areas are relatively independently acting units. Important functions of transfer pricing are the determination of success and the coordination: on the one hand, the divisions should recognize their share in the overall success of the company and, on the other hand, the activities of the divisions should be coordinated with one another. Transfer prices can be formed on the basis of market prices if there is a market for the service and the divisions both have market access. They then fulfill the two functions of determining success and coordination. If the prerequisites for market prices are not met, transfer prices are formed in the company on the basis of costs. Theoretically there is the possibility of setting up transfer prices on the basis of marginal costs, but companies rarely make use of this variant. Transfer prices are usually based on full costs. However, it is also possible that transfer prices are determined on the basis of negotiations; such negotiations are often conducted on the basis of market prices or costs. See also success controlling (with references), profit centers (with references), transfer pricing, transfer pricing, dual, transfer pricing, international, transfer pricing, cost-oriented, transfer pricing, market-oriented, transfer pricing, negotiation-oriented.
Pricing, sales company
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