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In December 2017, Congress enacted the Tax Cut and Jobs Act (TCJA), which transitioned the U.S. to a quasi-territorial tax system and reduced incentives for U.S. multinational firms to invest overseas. Although prior studies find that the U.S. repatriation tax motivates firms to reinvest earnings offshore, they do not differentiate between investment outcomes attributable to tax deferral and financial reporting motives. I investigate the effect of financial reporting incentives to designate foreign earnings as indefinitely reinvested (IRFE) under APB 23 on foreign investment. Using a sample of U.S. multinational firms from 2007-2015, I decompose reported IRFE into a component based on investment and tax incentives to invest overseas (predicted IRFE), and a residual component that captures financial reporting incentives (excess IRFE). I find that excess IRFE are positively correlated with a history of benchmark-beating and CEO equity incentives. Excess IRFE, but not predicted IRFE, are significantly negatively associated with future foreign pretax ROA, especially relative to an estimated benchmark ROA. An increase in excess IRFE of one percent of assets is associated with a cumulative reduction of approximately 66 to 79 basis points in foreign pretax ROA and foreign ROA gap over the next three years. Among a set of privately owned firms, which face reduced reporting incentives, excess IRFE is not associated with future foreign profitability. Moreover, excess IRFE is associated with greater total cash holdings and foreign short-term investments than predicted IRFE. These results suggest that financial reporting incentives play a significant role in the accumulation of foreign earnings abroad and have negative profitability consequences.