978-1337276337 Test Bank Appendix A Part 1

Appendix A

Page 1

True / False

1. The state of economic development can affect accounting standards.

a. True

b. False

2. Japan has a greater number of differences than the United States between the amount of income reported to

stockholders and that reported to the taxing authorities.

a. True

b. False

3. No single explanation can be given for the divergence of accounting standards.

a. True

b. False

Appendix A

Page 2

4. In countries, like Japan and much of Europe, fewer differences between the amount of income reported to stockholders

and that reported to the taxing authorities exist than in the United States.

a. True

b. False

5. According to the text, in economies like those that made up the former Soviet Union, accounting standards are

relatively less complex due to the fact that they are just beginning to be developed.

a. True

b. False

6. Ultimately, it will be the responsibility of the FASB in the United States to decide if the advantages of IFRS’s outweigh

the disadvantages.

a. True

b. False

Appendix A

Page 3

7. A single set of accounting standards could help a U.S. company save time and money in the acquisition of a German

company.

a. True

b. False

8. IFRS are now mandatory in all member states of the economic and political organization known as the European

Union.

a. True

b. False

9. Companies in Mexico have to begin using IFRS by 2020.

a. True

b. False

Page 4

10. The U.S. accounting standards are more principle-based than IFRS.

a. True

b. False

11. While U.S. GAAP requires a complete set of financial statements, including a balance sheet, statement of

stockholders’ equity, income statement, and statement of cash flows, IFRS do not.

a. True

b. False

12. U.S. GAAP requires companies to present a balance sheet with classifications for current and long-term liabilities,

while IFRS do not.

a. True

b. False

Appendix A

Page 5

13. Both U.S. GAAP and IFRS apply the lower-of-cost-or-market rule in a similar manner to inventory.

a. True

b. False

14. Regarding the valuation of operating assets, IFRS allow companies to use fair value.

a. True

b. False

15. Under IFRS, if inventory is written down to a new lower market value, this cannot be reversed in later periods.

a. True

b. False

Page 6

16. Essentially, the entire statement of financial position is inverted compared to what is commonly seen in the United

States.

a. True

b. False

17. There is a standard format for all countries for the statement of financial position.

a. True

b. False

Multiple Choice

18. All of the following statements are true about inflation except

a. U.S. companies no longer present financial information adjusted for the effects of inflation.

b. in recent years, inflation has been more rampant in Latin America and South America than the rest of the world.

c. the FASB developed rules for companies in the United States to use to adjust for inflation.

d. the United States and Germany adjust their financial statements for inflation.

Appendix A

Page 7

19. Which of the following statements is true regarding common law?

a. In common law countries, there are generally more statutes written into the laws.

b. In common law countries, there is less reliance on interpretation by the courts.

c. Because more details are written into U.S. law, the FASB has shorter and more general accounting standards than

most countries.

d. The common law system has its roots in the United Kingdom.

20. Which of the following countries do not use a common law system?

a. United States

b. Germany

c. United Kingdom

d. United States and United Kingdom

21. All of the following are among the most important reasons why accounting standards differ around the world except

a. differences in the state of economic development.

b. differences in taxation.

c. differences in inflation.

d. differences in code law in all countries around the world.

Appendix A

Page 8

22. All of the following are advantages available to companies if a single set of accounting standards were used except

a. a single set of worldwide accounting standards would have no effect on accounting fee costs.

b. a single set of worldwide standards would make it much easier to decide whether to acquire a foreign company.

c. a single set of worldwide accounting standards would facilitate comparisons for investment purposes.

d. a single set of worldwide accounting standards would make it easier to access foreign capital markets.

23. Which of the following is a commonly cited disadvantage of having a new unified set of accounting standards?

a. Acquiring foreign companies would become a more confusing proposition.

b. Corporations may find themselves more susceptible to lawsuits due to the principles-based system.

c. Time and money would not be saved in accessing capital markets abroad.

d. The SEC would be dissolved if international accounting standards were adopted.

24. Which organization would have the ultimate responsibility of deciding if the advantages outweigh the disadvantages

in the adoption of IFRS accounting standards in the United States?

a. FASB

b. SEC

c. IASB

d. AICPA

25. The benefits of a single set of accounting standards used around the world would include all of the following except

a. they would eventually save companies considerable money in accounting fees.

b. they would prevent competitors from acquiring each other.

c. they would allow easier comparisons by analysts and investors.

d. they would facilitate access to foreign capital markets.

Page 10

28. The International Accounting Standards Committee was established in 1973 to develop worldwide standards. Which

group replaced it in 2001?

a. FASB

b. IFRS

c. IIA

d. IASB

29. What is the name of the formalized commitment of the IASB and the FASB to converge U.S. and international

accounting standards?

a. Sarbanes-Oxley Act

b. Norwalk Agreement

c. IFRS Foundation

d. Conceptual Framework

30. On the reporting of liabilities where a range of values exists as a possible outcome, IFRS require which of the

following points to be recorded as a provision, if the outcome is probable?

a. Low end of the range

b. High end of the range

c. Midpoint of the range

d. IFRS present no specific guidance as to this point.

31. Which of the following inventory costing methods is prohibited under IFRS?

a. FIFO

b. Weighted average

c. LIFO

d. Perpetual

Appendix A

Page 11

32. When comparing U.S. GAAP and IFRS, regarding the level of details in the standards and the level of disclosure

required, which of the following is correct?

U.S. GAAP IFRS

a.

Detail: More Detail: Less

Disclosure: More Disclosure: Less

b.

Detail: More Detail: Less

Disclosure: Less Disclosure: More

c.

Detail: Less Detail: More

Disclosure: Less Disclosure: More

d.

Detail: Less Detail: More

Disclosure: More Disclosure: Less