آموزش قیمت گذاری انتقالی: نظریه و نمونه

This paper presents a unified framework for teaching transfer pricing at the advanced undergraduate or Masters levels. The approach is based on the economic transfer pricing model of Hirshleifer [Hirshleifer, J. (1956). On the economics of transfer pricing. Journal of Business, 29 (July), 172–184; Hirshleifer, J. (1957). On the economics of the divisionalized firm. Journal of Business, 29 (April), 96–108] but uses a series of numerical examples to “flesh out” the principles arising from the purely diagrammatic approach taken by Hirshleifer. We also develop numerical examples that illustrate the effects that removing the frictionless markets assumptions (that underscore the Hirshleifer approach) can have on optimal transfer pricing rules. The focus here is on the lack of goal congruence introduced by agency considerations and the role of accounting procedures in alleviating these agency issues. The teaching materials embodied in this article were developed “at the coalface” and have been successfully used by the authors in advanced undergraduate managerial accounting classes.

The topic of transfer pricing is a mainstay of almost every advanced undergraduate course in managerial (or cost) accounting. The typical textbook approach is to consider, in a heuristic fashion, the setting of transfer prices on an “economic basis” and then to discuss alternative techniques such as cost-plus based transfer prices, negotiated transfer prices, and tax-efficient transfer prices. The economic approach is invariably considered as the “benchmark” against which these alternative transfer pricing policies should be evaluated. Given this, it is crucial that students have a good understanding of the economics of the transfer pricing problem, since without it they will have difficulty in obtaining a full appreciation of the costs and benefits associated with the alternative transfer pricing policies suggested in the literature.2 In the following sections, we develop the economic transfer pricing model in a form which, we have found, allows students to master the fundamental principles of the transfer pricing problem with little difficulty. Our approach is motivated by the seminal papers of Hirshleifer, 1956 and Hirshleifer, 1957 and in particular, the price theoretic (marginalist) approach to the transfer pricing problem on which those papers are based. However, our experience is that students often have difficulty in interpreting both the concepts and the optimization procedures that lie behind this price theoretic approach and that it is not until these concepts and procedures are demonstrated in terms of some numerical examples that students can fully comprehend them. Given this, our approach to the teaching of transfer pricing is based on a series of numerical examples which, starting with the simplest possible market scenario, are gradually developed into the more complicated market settings that one would expect to find in practice. These numerical examples are distributed to our students in note form several days prior to class and are initially worked through in a lecture (large group) class setting. The large group classes are supplemented by small groups (maximum 15 students) in which students work through a set of numerical problems based on the examples introduced in the (large group) lectures, under the supervision of a tutor (instructor). As a rule, we give class materials and example questions on transfer pricing to students some days prior to each class. We have found that this allows students to absorb the definitions of the mathematical symbols used in the examples, and gain a “feel” for the style of the arguments. This then allows them to focus critically on the economic concepts during the class. We spend some time ensuring that our students have a clear and detailed understanding of the Hirshleifer approach, through the practical examples. It has been found that this attention to detail in the fundamental economic model facilitates a deeper understanding of actual accounting practice. Once the marginalist approach to the transfer pricing problem has been firmly established in our students’ minds, its merits and limitations are then evaluated against the more discursive material on transfer pricing one normally finds in the text books of the area (Atkinson et al., 2001 and Horngren et al., 2005). It is well known, for example, that the assumptions on which the marginalist approach relies are unlikely to hold up in practice and it often has difficulties in accommodating the institutional and political factors encountered in specific applications. Our purpose here is to develop both the concepts and the optimization procedures that underlie the marginalist approach to transfer pricing in terms of the numerical examples we have successfully used in the classroom over many years. Our analysis begins with some preliminary remarks about the setting in which the transfer pricing problem arises. Section 3 of the article then introduces an example that demonstrates how optimal transfer prices are determined for a profit-maximizing firm consisting of several divisions, but where each division is obliged to pass all its output on for further “processing” to another division, with final sale occurring in a perfectly competitive “final” market. In subsequent examples, we relax the assumption of a single joint level of output for all divisions and introduce imperfect competition on the intermediate and final markets where divisional outputs are sold. However, the optimal transfer pricing rules derived in this section are all based on an idealized world of frictionless markets and perfect goal congruence. In Sections 4 and 5 we demonstrate the effects that removing these idyllic assumptions can have by determining the optimal transfer pricing rules that apply in a world where, first the perfect goal congruence assumption is relaxed and, second where market frictions exist. Our conclusions are summarized in the last section of the paper. Our advanced undergraduate classes encompass all the material summarized in Sections 2 and 3 of the paper and an elementary (non-mathematical) coverage of the material included in Sections 4 and 5. Our postgraduate classes cover Sections 4 and 5 in detail as well as the material in the Appendix. However, postgraduate students are also required to master some of the more advanced material contained in the literature, such as the article by Vaysman (1998).

We here present a coherent framework for the teaching of transfer pricing from the standpoint of Hirshleifer, 1956 and Hirshleifer, 1957 marginalist model. The majority of extant textbooks on managerial accounting include a chapter on transfer pricing. To the authors’ knowledge, however, none present the topic within a consistent and coherent economic framework. By introducing the student to the economics of transfer pricing, it is possible to provide a framework for explaining why, and with what effects, actual transfer prices deviate from those implied by the economic model. Our experience with students suggests that the economic transfer pricing model, as presented in this article, provides such a pedagogical framework. As was shown, the fundamental economic model, expressed through our three scenarios, represents a “base-case” theoretical abstraction from the actual behavior of managers in making their pricing and output decisions across divisions. The principal benefit of this approach lies in its flexibility in the face of a relaxation of the model’s basic assumptions. We illustrated this fact by relaxing two key assumptions: zero agency costs (divisional managers and the firm’s owners are interested in the same underlying variable: profitability) in Section 4, and demand/cost independence, in the Appendix. The model can also be extended in other directions, or used to justify existing accounting practices. We show in Section 4, for example, that in the presence of agency costs the Hirshleifer model may be used to justify absorption costing. Where no agency costs are present, the model may also be used to show that, under certain circumstances, variable-cost plus transfer prices are good approximations to Hirshleifer transfer prices. 21 Table 1 summarizes model development through the progressive relaxation of assumptions and indicates relevant sections of the paper. Table 1. Summary of models considered and their implications for optimal transfer price Section Market assumptions Technical/information assumptions Optimal transfer price 3, Case 1 Perfect competition; joint level of production; demand independence No agency costs; cost independence Transfer price = marginal cost in manufacturing division 3, Case 2 Perfect competition with intermediate output market; demand independence No agency costs; cost independence Transfer price = intermediate market price = marginal cost in manufacturing division 3, Case 3 Imperfectly competitive intermediate & final markets; demand independence No agency costs; cost independence Transfer price = marginal cost in manufacturing division 4 Imperfectly competitive intermediate & final markets; demand independence Non-zero agency costs: managers’ and shareholders’ utility functions differ in important respects Transfer price = marginal cost in manufacturing division; standard overhead absorption employed Appendix Demand dependence Cost dependence No simple marginalist transfer price exists Table options Another significant benefit of the Hirshleifer model, pedagogically speaking, lies in its ability to illustrate the loss that a firm may incur in using transfer pricing mechanisms that are not compatible with the marginalist economic model. For example, in setting transfer prices motivated by international tax planning considerations, a firm needs to balance the gains from tax savings against the potential economic losses suffered by sub-optimal utilization of resources. This kind of situation can, by simple examples extending the work of our three scenarios, be easily illustrated. Finally, and more generally, this approach to transfer pricing elucidates for the student the relevance of economic reasoning to the process of developing relevant managerial accounting practices.