Under U.S. GAAP, when new debt is issued for old debt:
A. extinguishment costs are deferred and amortized over the term of the new debt.
B. debt extinguishment costs are expensed as incurred.
C. modification costs are amortized over the term of the old debt.
D. old debt is not extinguished and new debt is recognized.
Answer:
In some countries, financial institutions operate under Shariah, which also gives
guidance about accounting practice in these institutions. Shariah is the:
A. financial accounting standards board in Saudi Arabia.
B. law governing human conduct that is derived from the Koran.
C. codification of banking regulations in the European Union.
D. political system used in South American countries.
Answer:
For which of the following purposes are cookie jar reserves primarily used?
A. Increasing reserves in less profitable years
B. Increasing profits in less profitable years
C. Decreasing expenses in profitable years
D. Decreasing the risk of non-payment of receivables
Answer:
Since 2001, which method of accounting for a business combination is required under
U.S. GAAP?
A. Pooling of interest method
B. Purchase method
C. Both purchase and pooling of interest methods are allowed
D. Purchase is required for transnational combinations, but pooling is allowed for
domestic combinations.
Answer:
How does U.S. GAAP differ from IFRS with respect to cash-settled share-based
payments?
A. U.S. GAAP always treats such payments as a liability.
B. U.S. GAAP offers the option to treat such payments as either a liability or equity.
C. IFRS and U.S. GAAP follow the same approach with respect to such payments.
D. U.S. GAAP, under certain circumstances, may treat such payments as equity.
Answer:
Parentco, Inc. had a negative cumulative translation adjustment of ($250,000) on its
balance sheet pertaining to its investment in Subko Ltd at the point in time that Parentco
sold its interest in Subko. How must Parentco handle this translation adjustment when it
records the sale of Subko?
A. As an increase in income (gain on disposal)
B. As a decrease in income (loss on disposal)
C. The cumulative translation adjustment will not be affected by the sale.
D. It will be a prior period adjustment to retained earnings.
Answer:
Part II of the GRI Sustainability Guidelines defines which one of the following?
A. Report content
B. Quality
C. Boundary
D. Standards for disclosure
Answer:
Which of the following is true about the format of financial reports?
A. All multinational corporations report Sales Revenue on their income statements.
B. Gross margin is a standard line item on income statements throughout the world.
C. Notes to financial statements may clarify international differences in statement
formats.
D. In all countries, total assets are shown on the left side of the balance sheet and
liabilities and owners’ equity are shown on the right side.
Answer:
Which of the following are drivers of corporate social reporting?
A. The level of media attention
B. Social pressure groups
C. Environmental pressure groups
D. All of the above
Answer:
Which of the following statements is true about the comparability of financial statement
of the United States and the United Kingdom?
A. The result of Latin American colonialism is the large number of countries with the
United Kingdom’s influence on their accounting practices.
B. The financial statements of companies in the United States and the United Kingdom
are comparable as they are prepared after adjusting inflation, which is a critical factor
affecting accounting practice.
C. The basic principle followed by both countries in preparing financial statements is
government economics and government tax and legal framework.
D. The accounting practices of both the countries are oriented toward the decision
needs of a large number of investors and creditors.
Answer:
What links the components of a Japanese keiretsu?
A. A governmental agency
B. A common industry affiliation
C. A common market
D. A bank
Answer:
Which of the following disclosures is required by U.S. GAAP in addition to separate
reporting for operating segments?
A. Operating income for each country in which a material amount of revenue is
derived
B. Additions to long-lived assets where such assets are hard to be readily removed
C. Revenues and long-lived assets for each country that constitutes 10% of more of the
combined revenues or assets
D. Operating income adjusted for inflation for each country where it has significant
operations
Answer:
When accounting for forward contracts, what is meant by the term “executory
contract”?
A. No cash changes hands
B. The CEO of the company is the only one authorized to engage in the contract
C. There must be a price paid for the option
D. The contract is valid if one of the parties sign it
Answer:
German accounting standards have a “reverse authoritative principle.” What does this
mean?
A. Reversing entries must be made before financial reports can be issued to the public.
B. Only tax deductible expenses can be used for determining accounting income.
C. Financial statements are the basis for taxation.
D. None of the above
Answer:
A cultural preference for accounting systems that rely on compliance with legal
requirements is called:
A. professionalism.
B. uniformity.
C. statutory control.
D. optimism.
Answer:
Why has corporate financial reporting in China not resembled reporting in Anglo-Saxon
countries?
A. There was a lack of distinction between business functions and social service
functions in Chinese reporting entities.
B. China has only recently become involved in international trade.
C. The concept of accounting was only introduced to China recently and therefore it
has not had time to develop properly.
D. The 1960’s Cultural Revolution eliminated the requirements that Chinese
corporations provide information on business operations.
Answer:
What is one problem in translating retained earnings using either the temporal or
current rate method?
A. There is no problem, since both methods use the historic rate method for
stockholders’ equity accounts.
B. Dividends are based on an average cost method.
C. Net income is calculated differently, depending upon which method is used.
D. Dividends are based on the current exchange rate under the current rate method,
while they are based on historical rates under the temporal method.
Answer:
What are the most disclosed social report items by the U.S., the U.K., and Australia?
A. Research and development of sustainable products
B. Greenhouse gas policies and procedures
C. Human resources and community involvement
D. Zero tolerance for racial, religious and gender bias
Answer:
Which of the following statements is true about accounting convergence?
A. Convergence is a synonym for harmonization.
B. Convergence is the opposite of standardization.
C. Convergence, unlike harmonization, takes place over a period of time.
D. Convergence means developing high-quality standards in partnership with national
standard-setters.
Answer:
The second phase (1989-1993) of the IASC’s efforts to harmonize accounting standards
was aimed at:
A. making international accounting standards more flexible.
B. creating greater financial statement comparability across countries.
C. adding new alternatives for accounting practices desired by the international
community.
D. strengthening the enforcement power of the IASC.
Answer:
Which of the following statements is true about the IASB’s approach to accounting
standard setting?
A. The IASB approach is very similar to the rules-oriented basis favored by the FASB
in the United States.
B. The IASB uses a principles-based approach to standards formulation.
C. The IASB pronouncements have been called a “cookbook” of accounting standards.
D. The Sarbanes-Oxley Act requires the IASB to move toward the approach for
standard setting used by the FASB.
Answer:
According to IFRS 3, which of the following statements is true about the treatment of
Goodwill arising from business combinations?
A. It is capitalized and amortized over a period of no more than 40 years.
B. It is expensed in the year the subsidiary is acquired.
C. It is required to be tested for impairment every year.
D. It is amortized over between 5 and 40 years.
Answer:
Which of the following methods uses the current exchange rate to consolidate all
accounts of a foreign subsidiary into the financial statements of its parent?
A. Current rate method
B. Temporal method
C. Current/noncurrent method
D. None of the above
Answer:
As one of the sources of accounting distortions, the intentional overstatement of an
accrued restructuring charge is often referred to as a practice of:
A. earnings management.
B. capital adjustment.
C. asset management.
D. risk management.
Answer:
On December 1, 20×1 Pimlico made sales to a customer in India and recorded Accounts
Receivable of 10,000,000 rupees. The customer has until March 1, 20×2 to pay. On
December 1, 20×1, Pimlico paid $500 for a put option to sell rupees at a strike price of
$2.30 per 100 rupees on March 1, 20×2, which was the spot rate on December 1, 20×1.
On December 31, 20×1, the spot rate was $2.80 per 100 rupees and the option premium
was $0.004 per 100 rupees.
What is the fair value of the option on December 1, 20×1?
A. $0
B. $500
C. $400
D. $10,000
Answer:
The IASB’s Framework for the Preparation and Presentation of Financial Statements
(1989) establishes:
A. the required practices that should be followed by accountants in preparing financial
statements.
B. the structure, content, and format of financial statements.
C. sanctions for failure to comply with the IASB standards.
D. the concepts to be used in formulating international accounting standards.
Answer:
What is a prime reason that the IRS has found it difficult to obtain information needed
to examine the transfer pricing scheme of foreign parents with U.S. subsidiaries?
A. The information is held by the foreign parent, which is beyond the jurisdiction of
the U.S. taxing authority.
B. Since transfer pricing is not a significant issue to multinational corporations, little
information about it exists.
C. United States does not have tax treaties with the most important countries involved
in foreign direct investment in this country.
D. Computer systems have not been adapted to receive the data from companies in
foreign countries.
Answer:
Foreign companies listed on U.S. stock exchanges must reconcile their net income and
stockholders’ equity to U.S. GAAP. Which ratios can be calculated with the information
provided in this reconciliation?
A. Operating profit margin
B. Asset turnover
C. Return on equity
D. Current ratio
Answer:
Why should financial analysts endorse the adoption of IFRS worldwide?
A. It would eliminate the time lag between the end of the year and the publication of
financial statements that varies considerably across countries.
B. It would increase the comparability of financial statements across countries.
C. It would increase the demand for the services of international financial analysts.
D. The services of financial analysts would become more valuable to investors.
Answer:
In November 2007, which of the following organizations removed the requirement that
foreign private issuers using IFRS reconcile their financial statements to U.S. GAAP?
A. IASB
B. EU
C. SEC
D. FASB
Answer:
Carbon trading is underpinned by what product?
A. Carbon neutrality
B. Carbon credits
C. Carbon taxes
D. Carbon offsets
Answer:
The term “Class A Accounting” as it is used by the researcher Christopher Nobes refers
to:
A. conservative accounting systems.
B. the most efficient accounting systems.
C. accounting systems that primarily serve external shareholders.
D. accounting systems developed primarily for creditors and taxing authorities.
Answer:
Under IAS 37, inflows of resources that are “virtually certain” to be received should
be:
A. disclosed as contingent assets in the notes to the financial statements.
B. recognized as assets.
C. undisclosed until management is absolutely certain that resources will be received.
D. reported only in the cash flow statement.
Answer:
Under what circumstance, both U.S. GAAP and IAS 2 will provide similar result with
respect to inventory valuation?
A. When historical cost is greater than the net realizable value
B. When replacement cost is lower than historical cost
C. When replacement cost is greater than the net realizable value
D. When normal profit margin is less than 15%
Answer: