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Researching GAAP
Situation:
Golf-Travel Inc. is a U.S. company that provides travel packages for individual golfers and corporate golf outings. The company has mainly focused on U.S. customers but has decided to expand its business globally. Ben Watson, the companys CEO, has decided that the best location for the companys European operations is Ireland. While Mark obviously appreciated all of the golf related history in Ireland, he was also attracted by Irelands low 12.5% corporate tax rate.
In January 2019, Golf-Travel formally opened its European operations, called Europe-Golf, in Portmarnock, Ireland, as a wholly owned subsidiary of Golf-Travel. During 2019, the subsidiarys performance exceeded expectations by hosting almost 400 individual golf trips and 200 corporate outings. At the end of the year, the subsidiary reported pretax income of 324,260 and the subsidiary paid Irish taxes of 40,533, leaving a net income of 283,727.
Directions:
Ben Watson has asked you, Golf-Travels Chief Financial Officer, to research the generally accepted accounting principles and write a memo that summarizes the tax issue of earnings of foreign subsidiaries. He is interested in understanding the different financial statement reporting issues of a strategy that remits the earnings back to the United States versus a strategy of permanently reinvesting the earnings back into the Irish subsidiary.
**This case will require the use of the FASB Accounting Standards Codification. The link is listed below:
FASB Accounting Standards Codification
**Please include references.
