Which is true of a firm's transfer pricing policy?
A)Produces optimal results when set at the head office
B)Always promotes goal congruence
C)Leads to accurate measures of local performance
D)Is often designed to minimize tax expense
E)All of the above

Question

Quizplus · Accepted Answer

Transfer pricing policies are often designed with the goal of minimizing tax expense by allocating profits to subsidiaries located in countries with lower tax rates. This can lead to controversy and scrutiny from tax authorities, but it can also be beneficial for the overall financial health of the firm. The other statements are not necessarily true - a transfer pricing policy set at the head office may not always produce optimal results, it may not always promote goal congruence between subsidiary and parent, and it may not always lead to accurate measures of local performance.

Which Is True of a Firm's Transfer Pricing Policy