Objectives of Transfer Pricing (TP) include:

1. Goal Congruence:
   The prices should be set so that the divisional management’s desire to maximize divisional earnings is consistent with the objectives of the company as a whole. The transfer prices should not encourage sub-optimal decision-making. The system should be designed so that decisions that improve business unit profits will also improve company profits.
2. Foreign Exchange Gains Maximized and Losses Minimized:
   Transfer prices could be set between group members such that foreign exchange losses are minimized and gains maximized. This can be achieved by setting the transfer price in the subsidiary’s domestic currency, where currency strengthens against other subsidiaries’ domestic currencies. The group stands to gain if profit from exchange gain transactions is repatriated to the group for consolidation as part of income derived from its worldwide operations.
3. Performance Appraisal:
   The prices should enable reliable assessments of divisional performance. The prices form part of information that should:
   • Guide decision-making
   • Appraise managerial performance
   • Evaluate the contribution made by the division to overall company profits
   • Assess the worth of the division as an economic unit
   • The transfer prices should be designed such that they help in measuring economic performance