penses on an aggregate basis, whether the activities giving rise to the income are lo-
cated within the United States or are located outside the United States.
(xiii) Return on Assets. Return of assets is determined by dividing operating profit
by identifiable assets that generated or gave rise to the income.
(xiv) Identifiable Assets of an Industry Segment. Identifiable assets of an industry seg-
ment include tangible and intangible assets exclusively used by that industry segment
and an allocation of all nonexclusive assets, using any reasonable and consistent
method. This definition of identifiable assets of an industry segment are taken from
Treasury Regulation Section 1.6038A-3(c)(7)(iv).
(b) Existing Records
1.Specify the entity(ies) for which the taxpayer created or compiled a profit and
loss statement and/or balance sheets for internal accounting purposes.
2.Specify the entity(ies) for which the taxpayer created or compiled a profit and
loss statement and/or balance sheets for management purposes.
3.Specify the entity(ies) for which the taxpayer created or compiled a profit and
loss statement and/or balance sheets for disclosure to shareholders.
4.Specify the entity(ies) for which the taxpayer created or compiled a profit and
loss statement and/or balance sheets for disclosure to financial institutions.
5.Specify the entity(ies) for which the taxpayer created or compiled a profit and
loss statement and/or balance sheets for disclosure to government agencies,
whether foreign or domestic.
6.Specify the entity(ies) for which the taxpayer created or compiled a profit and
loss statement and/or balance sheets for disclosure to any other persons.The preceding requirements are directly taken from the existing records test in
Treasury Regulation Section 1.6038A-3(c)(4). Treasury Regulation Section
1.6038A-3(c)(4) speaks of profit and loss statements. Our position is that the IRS,
having been authorized to acquire profit and loss statements, has the authority to ob-
tain balance sheets for the same entity.
7.The taxpayer is to transmit all of the previously mentioned profit and loss state-
ments and/or balance sheets to the international examiner within ___ days after
receiving the IDR.The following standards apply to profit and loss statements and balance sheets: As a
general matter, when a taxable year is under review, the taxpayer must submit the
profit and loss statement, the balance sheet preceding the year being reviewed, and
the balance sheet after the year being reviewed. All such profit and loss statements
and balance sheets shall be submitted to the international examiner under this provi-
sion:
- Whether or not the profit and loss statement and balance sheets are compiled or
certified, - Whether or not the taxpayer applies uniform inventory capitalization,
29 • 30 TRANSFER PRICING FOR INTERCOMPANY TRANSACTIONS