Skip to content

ACCA Strategic Professional · Advanced Financial Management · Dividend policy in multinationals and transfer pricing

Which factor would most directly limit a parent's ability to use inflated transfer prices as a way of remitting funds from a subsidiary in a country with tight exchange controls?

Arm's length transfer pricing rules enforced by tax authorities, together with the customs duty cost of higher declared values, most directly limit inflated transfer prices as a remittance route. Dividend payout ratios, year-ends and equity preferences do not restrict how goods are priced between group companies.

  1. AThe parent's preference for equity finance
  2. BTax authorities' transfer pricing rules requiring arm's length prices, together with customs duty exposureCorrect
  3. CThe subsidiary's use of a different accounting year-end
  4. DThe parent's choice of dividend payout ratio

Explanation

Inflated transfer prices move cash out as payment for goods, but authorities enforce arm's length pricing, and higher declared values raise customs duties. The other factors do not constrain this route.

Did you get it right without looking?

One question tells you little. A timed set on Dividend policy in multinationals and transfer pricing shows your real accuracy, how long you take and where you lose marks.

Practise Dividend policy in multinationals and transfer pricingFree diagnostic mock

More Dividend policy in multinationals and transfer pricing questions