A
Activity-based costing (ABC), 66–67
B
Business model changes
added value notion, 58–59
audit ability, 59–60
business strategy
arm’s-length principle, 56–57
expenditure flows, 54
formula-based apportionment, 57
MNEs, 55–56
OECD guidelines, 56–57
outsourcing, 54–55
price determination, 57
supply-chain issues, 54
transfer pricing policy component, 55
distributed strategy, 52–53
domestic strategy, 51
global strategy, 51
resource allocation, 51
stakeholders, 60–62
transnational corporation, 52
transnational organization
centralized decision making, 53
key philosophy, 52
local autonomy, 53
Nestlé, 54
overseas components, 52
principal characteristics, 52
structure, 53
C
Changing times, model development
competitive price, 64
cost of things
ABC model, 66–67
direct cost, 65
marginal and absorption costing systems, 66
support cost, 65–66
total cost, 65
return on assets
categories, 67–68
financial assets, 68
intellectual assets. see Intellectual assets
physical assets, 68–69
Cost-based transfer pricing, 30–32
Cost object, 19–20
D
Differential risk, 22
Direct costs, 19, 65
E
Enterprise resource planning (ERP) systems, 86–87
EVA®, 58, 86
Exchangeable risks, 21
External influences
conflict scenario
arm’s-length result, 48
dumping product, 46
Irish entity, 45–46
market-based transfer price, 46
MNEs and taxing authorities relationships, 44–45
tax and customs administrations, 47
tax jurisdiction, 46
tax-planning tool, 44
transaction value, 47
upstream and downstream entity, 45
globalization, 39
government income
2010 OECD guidelines, 44
bilateral agreements, 44
FDI, 42–43
global economic crisis, 42–43
government revenue and expenditure, 42
MNEs, 43–44
international organizations. see Foreign direct investment
international peacekeeper, 48–49
tax minimization, 39–40
US entity, 39
F
Financial assets, 68
Financial management function, 80–81
Fixed costs, 19
Foreign direct investment (FDI)
commercial venture, 40
deregulation and privatization, 41
foreign investment and acquisition, 41
government income, 42–43
home country and host country, 40–41
joint venture/strategic alliance, 40
profit repatriation, 42
tariff liberalization, 41
G
Great Depression, 4
Great War, 4
H
Human capital, 69
aggregation, 74
cost-based measurement system, 70–71
depletion, 72
explicit/domain knowledge, 70–72
implicit knowledge, 70, 73–74
opportunity cost, 71
S-curve forecasting, 73–74
standard cost, 71
value-creating process, 70
value of knowledge, 71
I
Indirect costs, 19–21, 65
Intellectual assets
customer capital, 75
economic web capital, 76
human capital, 69
aggregation, 74
cost-based measurement system, 70–71
depletion, 72
explicit/domain knowledge, 70–72
implicit knowledge, 70, 73–74
opportunity cost, 71
S-curve forecasting, 73–74
standard cost, 71
value-creating process, 70
value of knowledge, 71
structural capital, 74–75
International organization
evolution
global commercial enterprise, 7
Guilds, 6
merchant, 5–6
MNEs, 6–7
harmony/conflict
cross-border transactions, 12–13
JITSIC, 12
OECD, 12–13
revenue authorities, 11–12
taxable profits, 11
long-distance trading, 2
The Periplus of the Erythraean Sea, 1
profitability
accountability, 9
corporate social responsibility, 9
demand, 7–8
multinational and transnational corporations, 8
transparency, 9
Silk Road, 1
societal evolution, 1–2
trade development
barter system, 3
economic growth, 4
foreign trade, 5
global economy, 4
globalization, 3
global markets, 5
law of competitive advantage, 3
Made In tag, 2
multilateral trade agreement, 4–5
trade liberalization, 3–4
transfer pricing model
maturity and profit, 9
organization structure, 10
outsourcing and subcontracting, 10
supply units, 9
J
Joint International Tax Shelter Information Centre (JITSIC), 12
K
Knowledge management function, 80–81
L
Land of Punt, 2
M
Market-based transfer pricing, 29–30
Market risks, 21
Multinational enterprises (MNEs), 6–7, 26–27
business strategy, 55–56
government income, 43–44
pricing strategy, 16
and taxing authorities relationships, 44–45
N
Negotiated transfer pricing, 30
O
Organisation for Economic Co-operation and Development (OECD), 12–13, 56–57
Overheads, 19–21
P
Penny Farthing plc
assembly function, 83–85
design and development capital base and costs, 82–83
economic value, 80
ERP system, 86–87
EVA®, 86
financial management function, 80–81
headquarters
annual charge, 82
capital base and costs, 81
knowledge management function, 80–81
legal services, 80–81
organizational family, 79–80
performance measurement, 85
Sales, Marketing, and Distribution outlets, 83–84
strategic management function, 80–81
Physical assets, 68–69
Profit margin, 60
S
Scorecarding, 36
S-curve forecasting, 73–74
Smith, Adam (father of economics), 3
Strategic management function, 80–81
Strategy mapping, 36
Support cost, 65–66
T
Total cost, 65
Transfer pricing theory
Apple’s iPod Nano, 15–16
business sustainability, 16
cash flow, 28
competitive price, 33
cost
costing system, 21
cost object, 19–20
definition, 18
direct costs, 19
elements, 19–20
fixed costs, 19
indirect costs, 19–21
total cost, 18–20
true costs, 21
variable costs, 19
cost-based transfer pricing, 30–32
credit, 27–28
customers’ needs, 17–18
economic reality, 28
external-internal pricing
business change programs, 24
corporate coordination, 25
cost reduction, 23–24
divisional independence, 25
divisional managers, 25
market price, 23
selling price, 23–24
Goldilocks and the Three Bear, 16–17
internal conflict, 32–33
management reporting system, 34–36
market-based transfer pricing, 29–30
MNEs, 16, 26–27
monopolist, 17
multidivisional organizations, 33–34
negotiated transfer pricing, 30
organizational cash management, 29
perfect competition, 17
performance measurement, 36–37
primary objective, 25
profitability, 28
returns, 22–23
revenue authorities, 28–29
risk, 21–22
tariff s and consumption taxes, 15
Transnational organization
centralized decision making, 53
key philosophy, 52
local autonomy, 53
Nestlé, 54
overseas components, 52
principal characteristics, 52
structure, 53
V
Variable costs, 19
W
Weighted average cost of capital (WACC), 58
World Economic Conference, 4
World Trade Organization (WTO), 2
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