What is transfer pricing? How is transfer price determined in the cases,

i) Transfer Pricing with No External Market

ii) Transfer Pricing with a Competitive External Market

iii) Transfer Pricing with an Imper fect External Market.

Solution:

Transfer Pricing:

• Transfer pricing refers to the setting, analysis, documentation, and adjustment of charges made between related parties for goods, services, or use of the property (including intangible property).

• Transfer prices among components of an enterprise may be used to reflect the allocation of resources among such components, or …