Managing global transfer pricing while reducing ripple effects.
by Alan Shapiro, et al./Journal of Accountancy
Global companies are increasingly discovering that year-end adjustments to intercompany transfer pricing can improve the accuracy of their transfer pricing tax reporting and, can potentially, help them avoid overpaying taxes by millions of dollars. However, since tax authorities in the U.S. and abroad are more carefully scrutinizing these adjustments, it is imperative that businesses make their adjustments in the right way at the right time and with proper documentation. The ripple effect of adjustments can have serious implications.
Transfer Pricing Adjustments: How and When They Are Made
If your company is like many multinationals, you set transfer prices at the beginning of the year. However, these prices hold true only if all departments meet budgets and all results are consistent with projections — and as you know, these stars rarely align. The reconciliation of your projections against actual results can drive post-transaction pricing adjustments. Changes in third-party prices also can spark the need for an adjustment.This article has been excerpted from the Journal of Accountancy. Read the full article here.