Transfer Pricing Analysis

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Transfer Pricing Analysis
Introduction
There are a myriad of strategies and techniques used by organizations to manage transfer pricing, with many of them designed for tax advantages across varying national and regional boundaries. As institutional factors of a given nation including the economic, political and legal systems all impact the creation, direction and future composition of national accounting systems, an organization's taxation strategies need to take these factors into account (Shenkar, Luo, 2007). Any given national accounting system will have a direct impact on a given firm's investment, asset management and foreign currency management strategies. Transfer pricing is also used for averting taxation between nations as well, as the GlaxoSmithKline PLC case illustrates.
Assessment of Transfer Pricing Methods
In selecting transfer pricing methods, national, regional and state or province tax considerations are taken into account in addition to custom duties and enforcement, along with currency fluctuation considerations as well (Chan, Lo, 2004). One of the most common approaches to computing transfer price is the resale price method, which is used for measuring the potential profitability of the transferred product to a distributor, dealer or channel participant (Cowen, Phillips, Stillabower, 1979). This method requires accuracy and clarity of gross margin calculations and also must taken into account variations in currency exchange rates to satisfy the

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