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Question: Mini Golf Corporation is a fully owned


Mini Golf Corporation is a fully owned foreign subsidiary of Fun Parks, Inc. Mini Golf operates in a foreign jurisdiction with a tax rate of 15% whereas Fun Parks, Inc. is a U.S. corporation that has a 35% tax rate. Mini Golf has earnings of $2,000,000 this year, and there are no book-tax differences. The firm is subject to taxation at 15% in its home country. When it eventually distributes the earnings back to Fun Parks (which will not happen in the current year), it will have to pay the additional 20% tax (the U.S. tax rate of 35% – the foreign rate of 15%). Typically, Fun Parks (a U.S. GAAP reporter) does not use the exception for recording its tax accrual found in FASB ASC 730-30-25-17. Thus, it would typically record the tax expense in the current year at $700,000. However, this year it has decided to take advantage of the exception and report tax expense of only $300,000. If you were the auditor, what other pieces of information would you like to evaluate before signing off on the company’s tax accrual?
[Complete the “Permanently Reinvested Earnings” Surfing the Standards Case before making the judgments in this case.]

2.99

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