Grant, a Multinational Corporation Based in the U

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The Answer is Because Grant used ASC 740-30 (APB 23) to avoid reporting any U.S. deferred tax liability for the $50 million of foreign subsidiary earnings, any repatriation of these profits back to the U.S. causes a spike (increase) in the company's book effective tax rate. The U.S. tax on these dividends (after any allowable foreign tax credit) produces a current tax expense, but the book income will not include the dividends (as the underlying profits were reported as book income in a prior year). With the numerator of the effective tax rate fraction increasing and the denominator staying the same, the effective tax rate increases.

Grant, a Multinational Corporation Based in the U

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