The activity-based costing approach justifies the transfer prices a multinational corporation uses to transfer unique company parts or services among its divisions located in different countries. This article illustrates how this approach reduces the probability of costly tax audits and assists in obtaining an advanced pricing agreement.
Get full access to this article
View all access options for this article.
References
1.
BeikLeland L., and BuzbyStephen L. (1973), “Profitability Analysis by Market Segments,”Journal of Marketing, 37(3), 48–53.
2.
BurnsJane O. (1980), “Transfer Pricing Decisions in U.S. Multinational Corporations,”Journal of International Business Studies, 11(2), 23–39.
3.
CarterWilliam K., MaloneyDavid M., and Van VrankenM. H. (1998), “The Problems of Transfer Pricing,”Journal of Accountancy, 186(1), 37–40.
4.
CavusgilS. Tamer (1996), “Pricing for Global Markets,”The Columbia Journal of World Business, 31(4), 66–78.
5.
CoburnSteve, GroveHugh, and CookTom (1997), “How ABC Was Used in Capital Budgeting,”Management Accounting, 78(11), 38–46.
6.
CollinsFrank, and WernerMichael L. (1990), “Improving Performance with Cost Drivers,”Journal of Accountancy, 169(6), 131–34.
7.
CooperRobin, and KaplanRobert S. (1988), “Measure Costs Right: Make the Right Decisions,”Harvard Business Review, 66(5), 96–103.
8.
DunnePatricia M., and WolkHarry L. (1977), “Marketing Cost Analysis: A Modularized Contribution Approach,”Journal of Marketing, 41(3), 83–94.
9.
DurstMichael C. (1998), “Transfer Pricing Documentation and APAs in the Era of Worldwide Transfer Pricing Scrutiny—Some Practice Points,”Tax Management International Journal, 27(3), 131–35.
10.
FallonGeralyn M. (1997), “Advance Pricing Agreements,”Taxes, 25(6), 304–28.
11.
FraedrichJohn P., and BatemanConnie R. (1996), “Transfer Pricing By Multinational Marketers: Risky Business,”Business Horizons, 39(1), 17–22.
12.
GoebelDaniel J., MarshallGreg W., and LocanderWilliam B. (1998), “Activity-Based Costing: Accounting for a Marketing Orientation,”Industrial Marketing Management, 27(6), 497–510.
13.
KellyKevin (1991), “A Bean-Counter's Best Friend,”BusinessWeek, (October 25), 42–43.
14.
KimSuk H., SwinnertonEugene, and UlfertsGregory (1997), “1994 Final Transfer Pricing Regulations of the United States,”Multinational Business Review, 5(1), 17–25.
15.
KirpalaniV. H., and ShapiroStanley S. (1973), “Financial Dimensions of Marketing Management,”Journal of Marketing, 37(3), 1–18.
16.
KrumwiedeKip R. (1998), “ABC: Why It Is Tried and How It Succeeds,”Management Accounting, 79(10), 32–38.
17.
KrupnickiMichael, and TysonThomas (1997), “Using ABC to Determine the Cost of Servicing Customers,”Management Accounting, 79(6), 40–46.
18.
NessJoseph A., and CucuzzaThomas G. (1995), “Tapping the Full Potential of ABC,”Harvard Business Review, 73(4), 130–38.
19.
PearsonThomas C., and SchmidtDennis R. (1991), “Information Reporting, Record Maintenance, and Transfer Pricing Audits of Foreign and Foreign-Owned Corporations,”Taxes, 69(3), 172–80.
20.
PearsonThomas C., and SchmidtDennis R. (1998), “Transfer Pricing Tax Concerns for Global Financial Companies,”Taxes, 76(7), 23–33.
21.
PughRichard C., ed. (2000), International Income Taxation.Chicago: CCH Inc., 1155–63.
22.
SmithRoger B. (1989), “Competitiveness in the ‘90s,”Management Accounting, 71(3), 24–29.
23.
WeeklyJames K. (1992), “Pricing in Foreign Markets: Pitfalls and Opportunities,”Industrial Marketing Management, 21(2), 173–79.
