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Financial-Accounting Model For Transfer Pricing Based On Standardised Accounting Policies

Author

Listed:
  • Lilia Grigoroi

    (Academy of Economic Studies of Moldova, Moldova)

  • Veronica Grosu

    (Stefan cel Mare University, Suceava, Romania)

  • Anatol Melega

    (Stefan cel Mare University, Suceava, Romania)

Abstract

The globalisation of the world's economies and the internationalisation of companies are contributing to the development of new accounting and tax paradigms, which require a particular approach by regulators and multinationals. Increasing tax pressure on multinationals has led to the development of tax minimisation mechanisms through transfer pricing, a niche that has developed mainly due to the lack of tax regulation, i.e. clear tax and accounting policies for pricing transactions between related parties. The aim of this research is to develop a financial-accounting model for transfer pricing based on standardised accounting policies. The research methodology is oriented on the analysis of tax and accounting policies of 163 countries, which are affiliated to different economic and political groups. The results of the research are translated into the design of an econometric model of transfer pricing based on economic and financial information. The results of the research indicate that the method of transfer pricing depends on the economic strength of the affiliated entities that are based in the analysed state, and the dynamics of fiscal health is directly proportional to the overall development of economic security and the economic growth rate of the group. At the same time, it is observed that standardization is a method of optimising the calculation of transfer pricing if the distribution of the tax health index in dynamics at the level of the sample applying standardization is homogeneous. The proposed model helps to ensure that transfer pricing practices are consistent and transparent and that they comply with relevant laws and regulations. The limitations of the research are that the specific details of the model depend on the company's industry, its size and the nature of its operations.

Suggested Citation

  • Lilia Grigoroi & Veronica Grosu & Anatol Melega, 2023. "Financial-Accounting Model For Transfer Pricing Based On Standardised Accounting Policies," European Journal of Accounting, Finance & Business, "Stefan cel Mare" University of Suceava, Romania - Faculty of Economics and Public Administration, West University of Timisoara, Romania - Faculty of Economics and Business Administration, vol. 11(1), pages 3-11, February.
    • Handle: RePEc:scm:ejafbu:v:11:y:2023:i:1:p:3-11
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    References listed on IDEAS

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    1. Lakhal, Salem Y., 2006. "An operational profit sharing and transfer pricing model for network-manufacturing companies," European Journal of Operational Research, Elsevier, vol. 175(1), pages 543-565, November.
    2. Andrew B. Bernard & J. Bradford Jensen & Peter K. Schott, 2006. "Transfer Pricing by U.S.-Based Multinational Firms," NBER Working Papers 12493, National Bureau of Economic Research, Inc.
    3. da Silva Stefano, Gustavo & Antunes, Tiago dos Santos & Lacerda, Daniel Pacheco & Wolf Motta Morandi, Maria Isabel & Piran, Fabio Sartori, 2022. "The impacts of inventory in transfer pricing and net income: Differences between traditional accounting and throughput accounting," The British Accounting Review, Elsevier, vol. 54(2).
    4. Gao, Lu & Zhao, Xuan, 2015. "Determining intra-company transfer pricing for multinational corporations," International Journal of Production Economics, Elsevier, vol. 168(C), pages 340-350.
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