If a Company Allows Division Managers to Negotiate a Cost-Based

question 97

True/False

If a company allows division managers to negotiate a cost-based transfer price,it is better to use actual costs rather than standard costs.Otherwise,the selling division has no motivation to control costs.

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Definitions:

IFRS

Global accounting guidelines known as International Financial Reporting Standards are used for the preparation of financial statements.

U.S. GAAP

United States Generally Accepted Accounting Principles - a framework of accounting standards, principles, and procedures used in the U.S. for financial reporting.

Revaluation

The process of reviewing and adjusting the carrying value of an asset or currency to reflect its current market value.

Commercial Substance

A concept in accounting that signifies a transaction causes a change in the future cash flows that is significant to a business.