Arm's-length pricing:
A) becomes difficult when sales to outside parties occur in a product category.
B) is the price that unrelated parties would have reached on the same transaction.
C) does not ensure proper intracompany pricing.
D) is the discounted "dealer" price derived from end-market prices.

Question

Quizplus · Accepted Answer

Arm's-length pricing refers to the price that unrelated parties would have reached on the same transaction, meaning that it is a fair market price that is independent of any relationship or affiliation between the buyer and the seller. Option A is incorrect because the presence of sales to outside parties does not make arm's-length pricing difficult, in fact, it is the other way around as it provides a benchmark for determining proper pricing. Option C is not entirely accurate as arm's-length pricing does aim to ensure proper intracompany pricing, although it is not a guarantee. Option D is incorrect because the discounted "dealer" price is not necessarily the same as the arm's-length price.

Arm's-Length Pricing