![]() Date: 2024-08-17 Page is: DBtxt003.php bk009120400 | |||||||||
TrueValueMetrics
ACTION INFORMATION FOR ALL OF SOCIETY Metrics about the State, Progress and Performance of the Economy and Society Metrics about Impact on People, Place, Planet and Profit Chapter 12 - ANALYSIS AND REPORTING - III (THEMATIC ISSUES) 12-4 ANALYSIS OF PRICE | |||||||||
Price data There is a considerable body of data about prices going back a very long time ... but rather less about what these prices mean.
We know a lot about some prices, and rather little about other prices. Some prices seem to be hidden from public view ... and one has to wonder why? What prices should be It is relatively easy to make a judgment about what something should be priced at. From this it is reasonably easy to judge that a transaction reflects a fair price ... and is probably an honest transaction. But that presupposes that it is possible to see the price of a transaction ... and this is usually not the case. A colleague had a job in one country (around 1988) where he had to review big contract pricing to help reduce corruption and kick backs ... and he did his work very conscientiously. He refused to OK one big contract because the pricing was way too high ... only to have the contract resubmitted again some months later with the price even higher. The explanation turned out to be that now it was going to take even more bribery to get the contract approved!These are big numbers and the temptation is huge. With very weak accounting and no accountability it is not at all surprising that corruption is endemic and financial control a shambles. And even where there is publicity about prices, it is not always clear what the information really means ... price disinformation is as common as price information.
Transfer prices Prices are critical to corporate profit ... which in turn has a disproportionate impact on value as measured by capital markets. But price is transient ... and just a part of the data needed to understand and record an economic transaction. It does not matter much if one barrel of crude oil sells for $200 a barrel ... but it matters very much if 100 million barrels of crude oil sell for this price. In value chain analysis, the transfer price determines how the value adding is shared between the entities in the chain it is very important. Because of its importance very little information is available about transfer prices. The idea that the “market” determines the price assumes a high degree of information and this is rarely the case. Transfer pricing serves those that have the control. Because of its importance very little information is available about transfer prices. The idea that the “market” determines the price assumes a high degree of information and this is rarely the case. Transfer pricing serves those that have the control. | |||||||||
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