Case 10Case 10 Xerox Corporation (B

Case 10
Case 10 Xerox Corporation (B)
There is no real process difference between our international and domestic transfer pricing systems. The breadth of the issues, however, is far greater for the international. Transfer pricing and currency translation are not a problem for us. I manage the process and resolve potential conflicts very quickly as we operate under clear and simple guidelines.
Raghunandan " sach " Sachdeu , corporate controller
Sach was explaining the process by which Xerox takes the sting and frustration out of two very volatile topics for many global corporation-multinational transfer pricing and currency trading. He further illustrated the specifics of the system.
Transfer Pricing
As Sach described the transfer pricing policy, purely domestic transfers utilized a full standard cost price method while foreign transfers used an arm's-length market price method. This was the general role, but the system was quite flexible, which enabled a quick response to changing market conditions. The document processing industry was extremely competitive, and Xerox management realized that they must respond to various global market pressures and competitive challenges. A manager from the Xerox Brazilian operation asserted the following: "The transfer pricing is designed to attack the market place. We drive the products in the market place, and Xerox knows the source of the revenue is the customer.”
The domestic transfer pricing was less complicated than the international situation. The controller for the US customer operations explained.
We purchase copiers from one of the Webster, New York, factories, part of the Office Documents products
Division. Normally, the transfer is made on a full standard cost basis, which includes a small percentage for administration. If we need to respond to a competitive pricing threat, we are unable to renegotiate. The manufacturing unit cannot sell below cost as they are structured to, at a minimum, cover their costs. In this case, the respective unit controllers would discuss possibilities of cost savings and the volume implications if pricing erodes unit sales. The corporate controller would step in, as appropriate, to help facilitate a solution. The aggressive business targets and the fierce competition made for some very heated and hard meetings. We were both under the same legal entity with the effects of transfer pricing balanced at achieving unit performance targets.
In the past, this (transfer pricing) would have been a big problem. We were totally focused on our individual business units given the tight unit performance targets. Today, we know the value of market share and the need to respond to competition. We learned that the performance comes from sales to external customer, besides with TQL [total quality leadership] the factory has become very sensitive to their costs.
Transfer pricing between foreign units was a little more complicated due to a greater breadth of issues. There were different legal entities, two different sets of regulatory authorities (for tax, duty,etc.), and two different currencies. In this situation Xerox used a market-based transfer price (market price less a discount). This method conformed to the US tax laws and to the rules of most of the other taxing authorities. In addition, market price followed the OECD quidelines. The transfer price denomination (currency) varied based on the product value added (explained in the next section). The market-based transfer price provided a margin to the selling unit as well as sufficient margin to the buying unit. This enabled the buying unit to be competitive in their local market.
The buying unit was responsible for duty and regulatory compliance. The geographic sales offices cooperated with the factories and kept them well apprised of their country regulations and routinely communicated changing requirements to the factories. They also ensured that production facilities were aware of the competitive pressures. Xerox sales units constantly encouraged quality and price improvements (part of the TQL program).
The new Xerox culture enhanced the awareness of the customer. The selling unit knew that they must respond to their internal customer (the buying unit). At the same time, they understood that the source of successful business was the satisfaction of the outside customer. The financial impact of transfer pricing on performance plans as a change in duty rates or country regulations (i.e., quotas, etc.) May have an adverse effect on performance. The pressure eased somewhat with the recent incorporation of more operating statistics to evaluate unit and manager performance. Sach points out:
We know what is going on and do not just manage by the financial numbers. Our regular controller conversations permit an open discussion of potential problems and offer a vehicle to explore alternative solutions. This is where the financial manage can help the line manager understand the full range of the business implications of their decisions. We also avoid surprises at corporate.
The arm's-length market price preserved the independence of the legal entity, but, at the same time, required managers to more closely consider the economic variables. A unit manager from South America said the following:
The financial measures are fair. Sometimes, however, there are events beyond our control, like a devaluation or unanticipated local inflation or an uncertain regulatory environment, which can alter our performance. I feel it is unfair that management sometimes does not take this into account. We need financial measures which have a longer time horizon[greater than one year].
As with the domestic transfer pricing, multinational transfer prices were negotiated if there were changes in the current competitive situation or changes in the economic variables such as currency, tax, duty, and country regulations. In this case, they employed a market-based transfer price as a reference point for negotiation. The corporate controller resolved conflicts or impasses between entities.
Currency exposure can create major swings in the economics of transfer pricing and was critical in the consolidation of foreign operations. Sach explains the Xerox policy as follows:
All units are responsible for their transaction currency exposure. There are no exceptions. The managers must manage. For product sourced through our manufacturing units the rule is simple. If manufacturing adds more than one-third of the product value, then the manufacturing unit is responsible for managing the currency hedging. Note that the transfer price uses the buyer's currency to calculate the price. If the manufacturing units add less than one-third of the product value, then the buying unit is responsible for the currency hedging. Note that the transfer price uses the seller's currency to calculate the price. In this


case, the value passes through the marketing organization for recovery. In essence, we determine the denomination of the transfer price by the value added to the product based on the cost and the final selling price.
Xerox management used both local and US currencies for foreign unit performance measures. The foreign manager, however, realized that the consolidation currency was US dollars, and dollar reporting was the basis of the corporate plan. Foreign unit managers made their commitment in US dollars, and corporate managers expected them to meet that commitment. The pressure to manage local currency changes was clearly on the foreign manager.
Sach explains the translation exposure currency policy as follows:
Normal changes in foreign currency, form 3 to 5 percent, are the responsibility of the foreign unit management to cover. We consolidate and report the company's results in dollars, and we expect the managers to deliver their plan. It is up to the local managers to oversee their translation currency exposure. If the currency swings vis-a-vis the dollar is [sic] greater than 3 to 5 percent, then the translation exposure becomes a corporate issue. We will peg off the standard (PDR) and coordinate and share the managing of the exposure with the foreign operation. We regularly discuss the currency topic during our weekly informal controller talks.
Sach indicated that if the currency goes in a favorable direction for the foreign operation, then corporate discounts the boosted financial results for unit performance measurement purposes. In this instance, corporate management may authorize the foreign operation to invest the currency-driven portion of their profits back into their unit, depending on the attractiveness of the proposals.
Sach said, "We regularly discuss the currency and transfer pricing topic at the FEC and on the telephone between controllers. We trust each other and are comfortable discussing the topics. This is how we prevent year-end surprises."
A subunit manager said the following:
In the Americas Customer Operations [Central and South America], the US dollar is our functional currency. 1 we make all our trades in dollars and our accounting based performance measures are in dollars. We work off a PDR (plan development rate), which is our reference point for all translations. We update the transfer prices on a quarterly basis.
An example of the complexity of the transfer pricing, currency translation, and performance measurement system is the following.
The Venray, Netherlands, facility regularly sold or transferred copiers to the US marketing unit. The Venray plant was legally part of Rank Xerox, but for performance purposes the general manager reported to Manufacturing Support (MS), a central corporate function. Corporate management explained the following:
The Venray site director currently reports to MS through the Rank Xerox Manufacturing Operations organization. We are currently working on recommendations on how to align and transition focus factories to report to the business t

ผลลัพธ์ (อังกฤษ) 2:

Case 10
Case 10 Xerox Corporation (B)
There is no difference between our Real Process Transfer Pricing Systems International and domestic. The breadth of the issues, however, is far greater for the international. Transfer pricing and currency translation are not a problem for us. I Manage the Process and resolve potential Conflicts very Quickly as we operate under Clear and Simple guidelines.
Raghunandan "sach" Sachdeu, Corporate Controller
Sach was explaining the Process by which Xerox Takes the Sting and Frustration out of Two very volatile Topics for many Global Corporation. -multinational transfer pricing and currency trading. He further Illustrated the specifics of the System.
Transfer Pricing
Transfer Pricing Policy As the Sach described, purely domestic transfers utilized a standard full cost method while Price used an Arm's transfers Second-Length Market Price method. This was the general role, but the system was quite flexible, which enabled a quick response to changing market conditions. The document processing industry was extremely competitive, and Xerox management realized that they must respond to various global market pressures and competitive challenges. A Manager from the Xerox Brazilian Operation asserted the following: "The Transfer Pricing is designed to Attack the Market Place. We Drive the Products in the Market Place, and Xerox knows the Source of the revenue is the customer."
The domestic Transfer Pricing was. less complicated than the International situation. The Controller for the US customer Operations expLAineD.
We Purchase copiers from one of the Webster, New York, factories, Part of the Office Documents Products
Division. normally, the Transfer is Made on a full standard cost basis. , which includes a small percentage for administration. If we need to respond to a competitive pricing threat, we are unable to renegotiate. The manufacturing unit can not sell below cost as they are structured to, at a minimum, cover their costs. In this case. , the respective unit controllers would discuss possibilities of cost savings and the volume implications if pricing erodes unit sales. The corporate controller would step in, as appropriate, to help facilitate a solution. The aggressive business targets and the fierce competition made ​​for some very heated and hard meetings. We were both under the Same Legal Entity with the effects of Transfer Pricing at achieving UNIT Balanced Performance targets.
In the Past, this (Transfer Pricing) would have been a Big Problem. We were totally focused on our individual business units given the tight unit performance targets. Today, we know the value of market share and the need to respond to competition. We learned that the Performance comes from Sales to External customer, besides with TQL [total quality Leadership] the Factory has Become very sensitive to their costs.
Transfer Pricing Units between Second was a more complicated Little Due to a Greater breadth of issues. There were different legal entities, two different sets of regulatory authorities (for tax, duty, etc.), And two different currencies. In this situation Xerox used a market-based transfer price (market price less a discount). This method conformed to the US tax laws and to the rules of most of the other taxing authorities. In addition, market price followed the OECD quidelines. The transfer price denomination (currency) varied based on the product value added (explained in the next section). The market-based transfer price provided a margin to the selling unit as well as sufficient margin to the buying unit. Buying this enabled the UNIT to be competitive in their local Market.
The Buying UNIT was responsible for Duty and regulatory compliance. The geographic sales offices cooperated with the factories and kept them well apprised of their country regulations and routinely communicated changing requirements to the factories. They also ensured that production facilities were aware of the competitive pressures. Sales Units Xerox quality and constantly encouraged Price Improvements (Part of the TQL Program).
The New Culture Xerox Enhanced the awareness of the customer. The selling unit knew that they must respond to their internal customer (the buying unit). At the same time, they understood that the source of successful business was the satisfaction of the outside customer. The financial impact of transfer pricing on performance plans as a change in duty rates or country regulations (ie, quotas, etc.) May have an adverse effect on performance. The pressure eased somewhat with the recent incorporation of more operating statistics to evaluate unit and manager performance. Sach points out:
We do not know what is going on and just by the Financial Manage Numbers. Our regular controller conversations permit an open discussion of potential problems and offer a vehicle to explore alternative solutions. This is where the financial manage can help the line manager understand the full range of the business implications of their decisions. We also Avoid surprises at Corporate.
The Arm's-Length Market Price preserved the Independence of the Legal Entity, but, at the Same time, required Managers to more closely consider the Economic variables. A UNIT Manager from South America said the following:
The Financial measures are fair. Sometimes, however, there are events beyond our control, like a devaluation or unanticipated local inflation or an uncertain regulatory environment, which can alter our performance. I feel it is unfair that management sometimes does not take this into account. We Need Financial measures which have a Longer time Horizon [Greater than one year].
As with the domestic Transfer Pricing, multinational Transfer prices were negotiated if there were changes in the current competitive situation or changes in the Economic variables such as currency, Tax,. duty, and country regulations. In this case, they employed a market-based transfer price as a reference point for negotiation. Conflicts resolved the Corporate Controller or impasses between entities.
Currency exposure Can create Major swings in the economics of Transfer Pricing and was in the consolidation of Second Critical Operations. Explains the Xerox Policy sach as follows:
All Units are responsible for their currency transaction exposure. There are no exceptions. The managers must manage. For product sourced through our manufacturing units the rule is simple. If manufacturing adds more than one-third of the product value, then the manufacturing unit is responsible for managing the currency hedging. Note that the transfer price uses the buyer's currency to calculate the price. If the manufacturing units add less than one-third of the product value, then the buying unit is responsible for the currency hedging. Note that the transfer price uses the seller's currency to calculate the price. In this Case, the Value passes Through the Marketing Organization for Recovery. In Essence, we Determine the Price by the Denomination of the Transfer Value added to the product based on the cost and the selling Final Price. Xerox Management used both local and US Currencies Performance for Second UNIT measures. The foreign manager, however, realized that the consolidation currency was US dollars, and dollar reporting was the basis of the corporate plan. Foreign unit managers made ​​their commitment in US dollars, and corporate managers expected them to meet that commitment. Manage changes to pressure the local currency was on the Second Clearly Manager. Sach Policy Explains the currency translation exposure as follows: Normal changes in currency Second, form 3 to 5 percent, are the Responsibility of the Second UNIT Management to Cover. We consolidate and report the company's results in dollars, and we expect the managers to deliver their plan. It is up to the local managers to oversee their translation currency exposure. If the currency swings vis-a-vis the dollar is [sic] greater than 3 to 5 percent, then the translation exposure becomes a corporate issue. We will peg off the standard (PDR) and coordinate and share the managing of the exposure with the foreign operation. Discuss the currency we regularly during our Weekly Topic Controller informal talks. Sach indicated that if the currency Goes in a favorable direction for the Second Operation, then Corporate Discounts boosted the results for UNIT Financial Performance measurement purposes. In this instance, Corporate Management May Authorize the Second Operation to Invest the currency-driven portion of their Profits Back Into their UNIT, depending on the attractiveness of the proposals. Sach said, "We regularly Discuss the currency and Transfer Pricing Topic at the FEC. and on the Telephone between controllers. We Trust each Other and are comfortable Discussing the Topics. This is How we Prevent year-End surprises. " A subunit Manager said the following: In the Americas Customer Operations [Central and South America], the US. dollar is our functional currency. 1 we make all our trades in dollars and our accounting based performance measures are in dollars. We work off a PDR (plan development rate), which is our reference point for all translations. We update on a quarterly basis the Transfer prices. An example of the Complexity of the Transfer Pricing, currency translation, and System Performance measurement is the following. The Venray, Netherlands, facility regularly SOLD copiers or transferred to the US Marketing UNIT. The Venray plant was legally part of Rank Xerox, but for performance purposes the general manager reported to Manufacturing Support (MS), a central corporate function. Corporate Management expLAineD the following: The Site Director Venray currently reports to MS Rank Xerox Manufacturing Operations Through the Organization. We are currently working on recommendations on how to align and transition focus factories to report to the business t.

ผลลัพธ์ (อังกฤษ) 3:

Case 10
Case 10 Xerox Corporation (B)
There is no real process difference between our international and domestic transfer. Pricing systems. The breadth of, the issues however is far, greater for the international. Transfer pricing and currency. Translation are not a problem for us. I manage the process and resolve potential conflicts very quickly as we operate under. Clear and simple guidelines.
.Raghunandan "sach," Sachdeu corporate controller
Sach was explaining the process by which Xerox takes the sting and. Frustration out of two very volatile topics for many global corporation-multinational transfer pricing and currency, trading. He further illustrated the specifics of the system.

Transfer Pricing As Sach described the transfer, pricing policyPurely domestic transfers utilized a full standard cost price method while foreign transfers used an arm s-length market. ' Price method. This was the general role but the, system was quite flexible which enabled, a quick response to changing market. Conditions. The document processing industry was, extremely competitiveAnd Xerox management realized that they must respond to various global market pressures and competitive challenges. A manager. From the Xerox Brazilian operation asserted the following: "The transfer pricing is designed to attack the market, place. We drive the products in the, market place and Xerox knows the source of the revenue is the customer. "
.The domestic transfer pricing was less complicated than the international situation. The controller for the US customer. Operations explained.
We purchase copiers from one of the Webster New York,,, of factories part the Office Documents products
. Division. Normally the transfer, is made on a full standard, cost basis which includes a small percentage for administration.If we need to respond to a competitive pricing threat we are, unable to renegotiate. The manufacturing unit cannot sell. Below cost as they are structured to at a, minimum cover their, costs. In this case the respective, unit controllers would. Discuss possibilities of cost savings and the volume implications if pricing erodes unit sales. The corporate controller. Would step in as appropriate,,To help facilitate a solution. The aggressive business targets and the fierce competition made for some very heated and. Hard meetings. We were both under the same legal entity with the effects of transfer pricing balanced at achieving unit. Performance targets.
In, the past this (transfer pricing) would have been a big problem.We were totally focused on our individual business units given the tight unit performance targets. Today we know, the value. Of market share and the need to respond to competition. We learned that the performance comes from sales to, external customer. Besides with TQL [total quality leadership] the factory has become very sensitive to their costs.
.Transfer pricing between foreign units was a little more complicated due to a greater breadth of issues. There were different. Legal entities two different, sets of regulatory authorities (for,, tax duty etc.), and two different currencies. In this. Situation Xerox used a market-based transfer price (market price less a discount).This method conformed to the US tax laws and to the rules of most of the other taxing authorities. In addition market,, Price followed the OECD Quidelines. The transfer price denomination (currency) varied based on the product value added (explained. In the next section). The market-based transfer price provided a margin to the selling unit as well as sufficient margin. To the buying unit.This enabled the buying unit to be competitive in their local market.
The buying unit was responsible for duty and regulatory. Compliance. The geographic sales offices cooperated with the factories and kept them well apprised of their country regulations. And routinely communicated changing requirements to the factories.They also ensured that production facilities were aware of the competitive pressures. Xerox sales units constantly encouraged. Quality and price improvements (part of the TQL program).
The new Xerox culture enhanced the awareness of the, customer. The selling unit knew that they must respond to their internal customer (the buying unit). At the, same time