Saturday, December 27, 2008

What is a Transfer Price?

An accounting transfer price is the accounting cost used for the transfer of goods or services between segments or subsidiaries of the same organization or family of companies.

Some examples include two departments or divisions selling to each other. Transfer prices are needed for performance evaluation purposes and accounting records. The selling unit gets credit for the transfer price and the buying unit/department must deduct the transfer price as an expense of doing business.

Transfer prices in international can be regulated and manipulated to save money with international subsidiaries.

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