Segment reporting

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Querist : Anonymous

Querist : Anonymous (Querist)

23 November 2015 A company has an inter-segment transfer pricing policy of charging at cost less 10%. The market price are generally 25% above cost. Is the policy adopted by the company correct?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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23 November 2015 It should be cost plus 10%. Yes the policy adopted by the company is correct if it is cost plus 10%.

Querist : Anonymous

Querist : Anonymous (Querist)

23 November 2015 No my question is exactly the same,it is cost less 10% to to inter segments and cost plus 25% to market.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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23 November 2015 Then your policy is not correct. Each segment should generate some profit. It can't be cost less.

Querist : Anonymous

Querist : Anonymous (Querist)

25 November 2015 what is the base of your answer,can you please explain, where it is mentioned.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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25 November 2015 It is practice followed in our company as well as by other companies. No company will charge inter segment pricing at cost less 10%.

Querist : Anonymous

Querist : Anonymous (Querist)

26 November 2015 Okay sir, is there any penalty or fine if company is doing so?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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26 November 2015 No penalty or fine it is the internal policy of the company it can do so.

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Querist : Anonymous

Querist : Anonymous (Querist)

26 November 2015 Okay sir. Thank you for your valuable advice.

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