A contract price policy for multinationals

Article Abstract:

A corporation's intercompany sales prices should be as close as possible to the prices charged for outside sales. A company contract price policy enables firms to comply with national and international tax laws, helps in achieving financial goals, and give the multinational consistency in its methods and definitions. The contract policy should provide a framework for control, while being flexible enough to cope with unique pricing problems. The contract price policy is based on the hierarchy established by the Internal Revenue Code regarding use of the comparable uncontrollable price method, the resale price method, and the cost-plus method. The controller of each division should draw up a division contract price schedule, and a tax advisor should be consulted before implementing any pricing policy.

Methods, Prices and rates, Contracts, Managerial accounting, Controllership

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Budgeting for an international business

Article Abstract:

Multinational companies need to consider the impact of variable international inflation rates, interest rates and foreign exchange rates when planning their budgets. These three external factors influence the budgeting process of multinational firms as they can significantly affect the profitability of a multinational company's international operations. The budget process of multinational companies should therefore be carefully controlled to ensure that the negative impact of fluctuating inflation rates, interest rates and foreign exchange rates is minimized.

Planning, Finance, Inflation (Finance), Interest rates, Business budgets, Inflation (Economics)

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Managing multinational exchange risks

Article Abstract:

A sale or purchase transaction between a multinational corporation in the U.S. and one in a foreign nation may be performed on a cash basis, on a forward exchange contract basis with an international bank, or on credit. Due to the future fluctuation of currency exchange rates, a certain level of risk will result from any international sale or purchase. The risk can be managed when firms know the different techniques of payment that exist, and how each technique is affected by fluctuations in foreign exchange.

International aspects, Foreign corporations, Currency options, Foreign exchange futures, Convertible money

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