Joint Ventures

[abhishreshthaa]

Joint Ventures:

Joint ventures present an incentive to set transfer prices at higher levels than would be used in sales to wholly owned affiliates because a company’s share of the joint venture earnings, is less than 100 percent.


To avoid potential conflict, companies with joint ventures should work out pricing agreements in advance that are acceptable to both sides.

Considerations for joint venture transfer pricing are:

1. The way in which transfer prices will be adjusted in response to exchange rate changes.


2. Expected reductions in manufacturing costs arising from learning curve improvements and the way these will be reflected in transfer prices.


3. Shifts in the sourcing of products or components from parents to alternative sources.


4. The effects of competition on volume and overall margins.

 

[jitendra05]

Joint Ventures:

Joint ventures present an incentive to set transfer prices at higher levels than would be used in sales to wholly owned affiliates because a company’s share of the joint venture earnings, is less than 100 percent.


To avoid potential conflict, companies with joint ventures should work out pricing agreements in advance that are acceptable to both sides.

Considerations for joint venture transfer pricing are:

1. The way in which transfer prices will be adjusted in response to exchange rate changes.


2. Expected reductions in manufacturing costs arising from learning curve improvements and the way these will be reflected in transfer prices.


3. Shifts in the sourcing of products or components from parents to alternative sources.


4. The effects of competition on volume and overall margins.

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