The Pricing of Goods, Services, and Technology Transferred to a Foreign

question 43

Essay

The pricing of goods, services, and technology transferred to a foreign subsidiary from an affiliated company, transfer pricing, is the first and foremost method of transferring funds out of a foreign subsidiary. When engaged in transfer pricing managers must consider at least two basic factors; Fund Positioning Effect and the Income Tax Effect. Explain each of these effects.

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Definitions:

Purchase

This term relates to the process of acquiring goods or services in exchange for money, encompassing a wide range of consumer and business transactions.

Unrealized Loss

A loss that results from holding onto an asset that has decreased in price, not yet realized through selling.

Realized Gain

The profit made from the sale of an asset or investment which has been sold for more than its purchase price.

Market Value

The present rate at which a good or service is available for purchase or sale in the open marketplace.