Intercompany Profits and Transfers of Inventory

Analysis

Many companies transfer inventories from one affiliate to another. Often the companies have integrated operations in which one

affiliate provides the raw materials, another manufactures finished products, another distributes the products, and perhaps

another sells the products at retail. In other cases, various affiliates may be established for selling the company's products in

different geographic locations, especially in different countries. Often tax considerations also have an effect on intercompany

transfers.

Required

a$.$ Are Xerox Corporation's intercompany transfers significant? How does Xerox treat intercompany transfers for

consolidation purposes?

b$.$ How does ExxonMobil Corporation price its products for intercompany transfers? Are these transfers significant? How

does ExxonMobil treat intercompany profits for consolidation purposes?

c$.$ What types of intercompany and intersegment sales does Ford Motor Company have? Are they significant? How are they

treated for consolidation?