Transfer pricing: early Italian contributions

Abstract

This paper aims at reviewing the early contributions made by Italian scholars to the field of transfer pricing, from the works of Francesco Villa (1840, 1853) to the birth of Economia Aziendale (in the first half of the twentieth century). Although this topic has been traditionally overlooked in the Italian accounting literature, this study shows how Italian accountants were familiar with different methods of transfer pricing and elaborated certain original solutions. The intensive, mainly theoretic discussion for attaching a value to goods exchanged amongst segments of the same company indicates an early recognition of the potential influence of organizational structure, intermediate markets, coordination and differentiation that may have laid the platform for a greater integration between financial and cost accounting. Unfortunately this genuine debate suddenly stopped: the diffusion of Zappa's theories partly explains this phenomenon.

Keywords:

• transfer pricing
• divisional profit
• market value
• cost basis

Acknowledgements

The authors are grateful to the two anonymous referees for their insightful comments. We alone, however, remain responsible for the views expressed. We are also in debt to the head of Istituto Tecnico Commerciale Martini (Cagliari, Italy), for allowing free access to its special library.

Notes

This classification presents, although only vaguely, the typical distinction between cost, revenue and profit centres, currently adopted in management accounting. Villa was not probably aware of the different level of autonomy and responsibility which characterizes these different centres and their managers. However, his classification appears as a primordial basis of the subsequent theories developed in Anglo-Saxon.

The theoretical and practical analysis of ‘large Administrations with Subsidiaries’ had already been included in Villa's first work (1840, 288–301).

One of these rare contributions was Cassandro (1957, 239–56).