Tipi Tips #4: Why is transfer pricing relevant for accountants?

Today’s topic is why transfer pricing is relevant for accountants.

You might think that transfer pricing is solely a tax concept, but it actually is much broader than that. In the International accounting standards (IAS) you will actually find a whole chapter dedicated to this topic called IAS 24. And in local accounting law, such as in the Netherlands, there is a requirement to identify transactions between related companies that are not in line with market conditions, or in other words not ‘at arm’s length’.

If the transactions between two companies are priced incorrectly, then the accounts of both companies are in the end incorrect as well. Those local accounts are the base for local tax returns. Having correct transfer pricing in place basically kills two birds with one stone. It solves the issue for both accounting and tax purposes. That is why transfer pricing is relevant for accountants as well.