By Vincent Bicudo de Castroa, Tiago Leoteb, Maryam Safaric
aDeakin Business School, Australia
bIBMEC Business School, Brazil
cRMIT University, Australia
As a response to the financial crisis of 2007-2008, financial service industry regulators have commonly requested financial service industry to implement fund transfer pricing (FTP) mechanisms. Despite the importance of the topic as highlighted in the practitioners’ literature since the 2000s, the use of FTP as a performance measurement system has been understudied. To add to our understanding of such mechanisms in the financial service industry, this paper demonstrates, through an analytical model, how FTP can be used as a performance measurement system in financial institutions. More importantly, this paper illustrates how FTP can be used for overcoming the distortions caused due to the transfer of funds between the business units.
Keywords: Management Accounting; Performance Measures; Transfer Pricing
Download: MAF Vol. 2 – Bicudo de Castro