Foreign-Owned Corporations in Ireland make profits. Some of these profits are paid out to their foreign-owners as dividends. If the profit is not paid out, but it stays with the company, then it is still really owned by the foreign investor. It is not accruing to Irish investors or adding to Irish wealth. In National Accounts, we want to reflect this reality of who owns the remaining profit, and so we treat it as if it is paid outward to abroad. We call this payment of the remaining profit Reinvested Earnings.
Reinvested Earnings are calculated as Gross Operating Surplus (which is similar to the business accounting concept of Earnings Before Interest, Taxes, Depreciation and Amortization), less interest, all Taxes, Consumption of Fixed Capital and dividends, but including any dividends or interest it has received on its investments.
In the accounts, Reinvested Earnings are treated as part of the Investment Income paid to the rest of the world in the Non-Financial Accounts. In the Financial Accounts (which shows changes in the balance sheets), the same amount is shown flowing into the assets belonging to the Rest of the World and held in Ireland.
Reinvested Earnings may be negative, as well as positive. If a company makes a loss then it will have negative Reinvested Earnings.
Reinvested Earnings can also flow into Ireland. If an Irish-owned company has foreign subsidiaries, those subsidiaries will pay Reinvested Earnings as investment income received and increased assets of the Irish parent.