Evaluating the Result
The first task in our evaluation is to look at the data that have been used in this example and restate it in more traditional terms. Figure 6.5 does that and expresses the outcome in just one currency, that of the home of Penny Farthing plc’s HQ, The United Kingdom.
Even without the operating profit generated by the final sale of the bicycles, the traditional performance measures suggest that a reasonable return is being made by the organization for all of those functions that are essentially driven by a transfer pricing mechanism. Nowhere, in any of our calculations to this point, was a profit requirement, perhaps the most contentious element of transfer pricing, used. While there will no doubt be debate surrounding the ...
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