Икономика и компютърни науки (Apr 2019)
Financial Accounting Aspects of Transfer Pricing
Abstract
The purpose of the paper is to perform a logical analysis of financial accounting aspects of transfer pricing. Interest in transfer pricing has increased in recent years, but not in terms of their financial accounting impact. The main points of the financial accounting concern are the evaluation of related party transactions, current accounting and documentation, reporting in financial statements and disclosure of transfer pricing transactions. An attempt has been made to compare possible approaches and transfer pricing methods according to International Accounting Standards, National Accounting Standards, Tax requirements and applicable methods in Management Accounting. The possible effects of transfer pricing application in financial statements are summarized. The financial accounting requirements for related parties disclosure under National Accounting Standards and International Accounting Standards have been considered. The main conclusions of the article can be summarized as follows: 1. The valuation of transactions at transfer prices must gravitate around the market price regardless of the applicable accounting framework; 2. Transfer Pricing Methods must be applied in a comprehensive way, combining financial accounting, tax and management accounting approach in order to balance different interests and regulatory requirements; 3. The most used instruments for eroding the tax base (BEPS), associated with transfer prices have a substantial tax effect, but they also result in serious distortions of many enterprises financial statements, both in size and in nature of the objects. This aspect of the problem needs serious empirical studies; 4. It is necessary to change further the international and national legal framework, related to financial accounting aspects of transfer pricing, in order to increase clarity, transparency, informativeness and comparability; 5. The existence of a legal framework- financial accounting and tax, is not sufficient to solve the problems related to transfer prices. Improving the competence level of all professionals and active control- internal and mainly external, should complement the process in order to be efficient. Voluntary and fully transparent disclosure of related party transactions is unlikely. Therefore, it is desirable to have a system of incentives and sanctions in place to comply with regulatory requirements on transfer pricing.
