SLP finance module 3 excell plus discussion

Running head: DISCUSSION POST 1

DISCUSSION POST 2

Discussion Post

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Institutional Affiliation

Discussion Post

Transfer pricing and responsibility centers are related concepts that play a major role in determining the company’s profitability. For example, the company may transfer some of its revenues offshore to countries where the corporate tax is lower and thus maximize its profits by transferring some of its intellectual rights to a subsidiary abroad, which in return it pays royalties (Hiemann, &, Reichelstein, 2012). Also due to the competitive nature of departments price transfer becomes essential in ensuring that the departments not only concentrates on their own profitability, but for the whole organization as well (PWC. (2012).

Similarly, responsibility centers may have an impact on the company’s profitability and performance. For example, a cost responsibility center may increase the company’s profitability by reducing its overhead costs or making unusual revenue through leasing or selling part of its assets (Slideshare, 2011).

In conclusion, the price transfer policy and the number and nature of responsibility centers influence the profitability of the company in several ways. Therefore, the company should carefully evaluate its policies regarding these two concepts in order to improve its performance.

References

Hiemann, M. and Reichelstein, R. The Dual Role of Transfer Prices in Multinational Firms: Divisional Performance Measurement and Tax Optimization. The European Financial Review. http://www.europeanfinancialreview.com/?p=5741

PWC. (2012). Transfer Pricing. Retrieved from http://www.pwc.com/gx/en/tax/transfer-pricing

Slideshare. (2011). Global Management Accounting. Retrieved from http://www.slideshare.net/costmgmt/issues-in-global-management-accounting-transfer-pricing