Question

Discuss how the concept of transfer pricing is relevant to fiji airways use appropriate examples?

Answer 1

Answer :- Transfer Pricing is the setting of the price for Goods and services Sold between controlled legal entities within an enterprise. It is the price at which related parties transact with each other such as during the trade of supplies or labor between departments. Transfer pricing is simply a accounting practices by which one part of multinational company charges another part for Goods and services to distribute profits between jurisdiction.

for example:- if a subsidiary company sells Goods to a parent company the cost of those Goods paid by the parent to the subsidiary is the transfer price.

For example :- in Fiji airways the transfer pricing aspects of financial transactions includes treasury activities, captive insurance, hedging and Cash pooling, guarantees and intragroup lending. Intragroup lending includes the lender's and borrowers perspective. The borrower's credit rating. The effects of group membership and guarantees. Loan fees and charges associated with the transactions.