Developing A New Assessment Model for Transfer Pricing in Accounting Management
Transfer pricing in managerial accounting represents the price at which a subsidiary within a group sells goods or services to another subsidiary of a group. Transfer prices are so important in managerial accounting because it affects the cost and revenues among transacting subsidiaries, resulting in a positive or negative performance evaluation of the profitability and management of a group’s entity or subsidiary. By verifying if the transfer pricing of a transaction / contract or the strategy used for a period of time is within the limits of the prices used on the independent market, the management could make financial decisions and adjustments in order to comply with the “free market” (independent and non-related party transactions) and also keep a good level of profitability. The model proposed looks at the return on total cost, the amount of profit attributable to a unit of total cost, obtained from affiliated transactions. The model will analyze a number of 43 large taxpayer from Romania, which activate on the market segment of manufacture of electrical / electronic equipment, other parts and accessories for motor vehicles. This model combines previous researches in the field of transfer pricing of the author, grouping them into a new tool for managers to better assess the level of profitability and transfer pricing risk of the entity managed.
Index Terms- affiliated transactions, profitability, return on total cost, transfer pricing.