The U.S. IRS has released an international practice unit on the Functional Currency of a Qualified Business Unit (QBU). The practice unit lays out the seven steps needed to make a determination concerning the functional currency of a QBU in relation to the computation of income earned in non-U.S. locations:

• Step 1 - Is Use of US Dollar as Its Functional Currency Required?
• Step 2 - If No, What is the Economic Environment of the QBU?
• Step 3 - Facts and Circumstances Review of QBU
• Step 4 - Residency of the QBU
• Step 5 - Currency of a QBU’s Books and Records
• Step 6 - Currencies Generating Revenue / Incurring Expenses
• Step 7 - Significance / Volume of QBU’s Independent Activities

International practice units are developed by the Large Business and International Division of the IRS to provide staff with explanations of general international tax concepts as well as information about specific transaction types. They are not an official pronouncement of law and cannot be used, cited, or relied upon as such.

Click the following link for the International Practice Units page on the IRS website.