Transfer Pricing refers to the pricing of goods, services, and intangible assets when they are exchanged between related entities, such as subsidiaries of a multinational corporation. This practice is crucial for determining how profits are allocated across different jurisdictions, which can affect tax liabilities and financial reporting. Governments closely monitor Transfer Pricing to prevent tax avoidance and ensure that transactions between related parties are conducted at "arm's length" prices—meaning the prices should be similar to those charged between unrelated parties. Proper documentation and compliance with local regulations are essential for businesses engaged in Transfer Pricing.