LO.4 Brian, the CFO of AutoCo, Inc., has used ASC 740-30 (APB 23) to avoid reporting any U.S. deferred tax expense on $60 million of the earnings of AutoCo’s foreign subsidiaries. All of these subsidiaries operate in countries with higher tax rates than the ones that apply under U.S. law. Brian wants to bring home $20 million in profits from these foreign subsidiaries in the form of dividends. How will this profit repatriation affect AutoCo’s book effective tax rate?

CRITICAL THINKING