Next, the project management teams implementing the transfer pricing system need to benchmark existing processes, systems and pricing methodologies to evaluate their relative strengths and weaknesses (Sijmonsbergen, Carey, Schmid, 2007). Documentation of the processes and the planned improvements, including the methodologies for defining market-based pricing are completed. These are often process flow diagrams that provide insight into the extent of the change planned to ensure the organization can accomplish transfer pricing successfully and profitability. Next, often organizations will complete pilots of their transfer pricing systems to validate interprocess and intersystem integration points (Sijmonsbergen, Carey, Schmid, 2007). Often pilots will run 90 days or longer, at the end of which they are evaluated in terms of system integration, interprocess communications and person's roles relative to the daily functioning of the transfer pricing system being clarified. Underscoring all of these factors is the need for ensuring change management programs and strategies are in place to provide those departments most affected with ownership of the system and a say in how the processes impacting their jobs will be changed over time...
Of the approaches which can be used for defining transfer pricing, the market price-based approach is the most effective. This approach allows for companies to benchmark their competitiveness relative to outside organizations and also makes the comparison process for internal departments and divisions more comparable.
References
Crow, Stephen, and Sauls, Eugene. 1994. Setting the right transfer price. Management Accounting 76, no. 6, (December 1): 41. ).
Michel Sijmonsbergen, Steven Carey, and Carsten Schmid. 2007. Best practice is the key to effective transfer pricing management. International Tax Review (October 1):
van Dijk, R., & van Dick, R.. (2009). Navigating Organizational Change: Change Leaders, Employee Resistance and Work-based Identities. Journal of Change Management, 9(2), 143.
Michael Wolff. 2007. Market Price-Based Transfer Price Systems. Empirical Evidence for…
