Description

Description: This course has been designed to introduce a variety of aspects of international business. Globalization and growing international trade amongst many different countries have brought new challenges and opportunities for many new economies and established economies.

This course applies theoretical and practical knowledge of competitive strategies in the context of globalization, particularly major entry and exit strategies of international business.

Background: This refers to an older set of standards stating how particular types of transactions and other events should be reflected in financial statements. In the past, international accounting standards (IAS) were issued by the Board of the International Accounting Standards Committee (IASC). Since 2001, the new set of standards has been known as the international financial reporting standards (IFRS) and has been issued by the International Accounting Standards Board (IASB). IASC has no authority to require compliance with its accounting standards. However, many countries require the financial statements of publicly-traded companies to be prepared in accordance with IAS.

What is Transfer Pricing?
Rapid advances in technology, transportation and communication have given rise to a large number of Multinational Companies (MNS) which have the flexibility to place their enterprises and activities anywhere in the world. The fact is that a significant volume of global trade nowadays consists of international transfers of goods and services, capital (such as money) and intangibles (such as intellectual property) within an MNS group; such transfers are called “intra‐group” transactions. There is evidence that intra‐group trade is growing steadily and arguably accounts for more than 30 percent of all international transactions. Furthermore transactions involving intangibles and multi‐tiered services constitute a rapidly growing proportion of an MNS’s commercial transactions and have greatly increased the complexities involved in analysing and understanding such transactions.

The structure of transactions within an MNS group (the component parts of which, such as companies, are also called “associated enterprises” in the language of transfer pricing) is determined by a combination of the market and group driven forces which can differ from the open market conditions operating between independent entities. Thus, a large and growing number of international transactions are no longer governed entirely by market forces, but by forces which are driven by the common interests of the entities of a group. In such a situation, it becomes important to establish the right price, called the “transfer price”, for intra‐group, cross‐border transfer of goods, intangibles and services. Transfer pricing is the general term for the pricing of cross‐border, intra‐firm transactions between related parties. “Transfer pricing” therefore refers to the setting of prices at which transactions occur involving the transfer of property or services between associated enterprises, forming part of an MNS group. These transactions are also referred to as “controlled” transactions, as distinct from “uncontrolled” transactions between companies that, for example, are not associated and can be assumed to operate independently (“on an arm’s length basis”) in reaching terms for such transactions.