International Finance and Accounting Handbook

one party and finished goods might be sold by a different party, but all records

are to be combined for this purpose.

• Financial statements are to be kept under U.S. accounting principles.


• Any reasonable method may be used to allocate the related party groups’ world-
  wide costs to the revenues generated by the sales of those products or services.
  The taxpayer must provide an explanation of its accounting methods, including
  the manner is which costs are allocated.

The preceding requirements as to profit and loss statements are taken from Treasury
Regulation Section 1.6038A-3(c)(2)(ii).

(iv) Taxpayers Are to Complete the Following. Specify the following amounts re-
flecting the entire business of the taxpayer and the related party group as a whole for
the year under review:

1.Worldwide gross revenues

2.Worldwide operating expenses

3.Worldwide operating income

4.Worldwide gross assets

Specify the following information for each industrial segment for the year under re-
view:

1.Gross revenues of the industrial segment, determined on a worldwide basis

2.Operating expenses of the industrial segment, determined on a worldwide basis

3.Operating income of the industrial segment, determined on a worldwide basis

4.Gross assets of the industrial segment, determined on a worldwide basis, based

on identifiable assets

Amounts provided in items 1 through 4, together with amounts provided in the in-
formation requested as to worldwide activities of the taxpayer and related-party
group provide the IRS with comparative data that may lead the international exam-
iner to request subsequent Transfer Pricing Information Document Requests.
Specify the following information for the same industrial segment as to U.S.-con-
nected products or services, determined on a worldwide basis, for the year under re-
view:

5.Gross revenues of the industrial segment as to U.S.-connected products or serv-

ices, determined on a worldwide basis

6.Operating expenses of the industrial segment as to U.S.-connected products or

services, determined on a worldwide basis

7.Operating income of the industrial segment as to U.S.-connected products or

services, determined on a worldwide basis

8.Gross assets of industrial segment as to U.S.-connected products or services,

determined on a worldwide basis, based on identifiable assets

Amounts provided in items 5 through 8, together with amounts provided in items 1

29 • 32 TRANSFER PRICING FOR INTERCOMPANY TRANSACTIONS