Which is NOT a common risk associated with local authorities’ scrutiny of a company’s
transfer prices?
A. Potential double taxation
B. Uncertainty as to the group’s worldwide tax burden
C. Problems in relationships with local tax authorities
D. Discovery of a tax treaty violation
Answer:
When a unit of a multinational corporation creates knowledge in specific areas that can
be used by other units within the organization, that unit is called a(n):
A. implementer.
B. global innovator.
C. local innovator.
D. integrated player.
Answer:
What is the main advantage of the American Jobs Creation Act of 2004 over the Tax
Reform Act of 1986 relative to FTC baskets?
A. A newer tax act is always more advantageous.
B. It has much fewer baskets and, as a result, more chance that a company won’t have
excess unused FTCs.
C. There is no advantage, as excess FTC’s from one basket still can’t be used to offset
tax in another basket.
D. The carryforward period for excess FTC’s was extended.
Answer:
Among the world’s nations, where does the People’s Republic of China rank in terms of
receiving foreign direct investment?
A. First
B. Fourth
C. Tenth
D. Fifth
Answer:
Which of the following is true about foreign direct investment?
A. It is a means of reducing transportation costs in export sales.
B. Since the 1980s, foreign direct investment has been relatively stable worldwide.
C. Only very large corporations are undertaking foreign direct investment.
D. It refers only to the amount of money U.S. corporations put into non-U.S.
businesses.
Answer:
What was the primary influence on Germany’s accounting regulations from the
mid-1980’s until very recently?
A. The Stock Corporation Law
B. The directives of the European Union
C. The Companies Act
D. The U.S. Financial Accounting Standards Board
Answer:
Which of the following methods for translating foreign currency financial statements
attempts to produce consolidated financial statements as if a foreign subsidiary had
actually used the parent company’s currency for all its transactions?
A. Current/Noncurrent method
B. Monetary/Nonmonetary method
C. Current rate method
D. Temporal method
Answer:
According to the Framework for Preparation and Presentation of Financial Statements
of the IASB, which of the following is NOT required for asset recognition?
A. Control of the resource
B. Ownership of the resource
C. Future economic benefits
D. Reliable measurement of the cost or value of the resource
Answer:
What does EU ETS stand for?
A. European Union Emissions Trading Scheme
B. European Union Emissions and Toxic Sludge
C. Eastern European Emergency Toxic Standards
D. Eastern European Electricity Transmission Standards
Answer:
Under IAS 21, which of the following is NOT a factor in determining functional
currency?
A. It is the currency that influences sales prices for goods and services.
B. It is the currency that mainly influences labor, material and other costs of providing
goods and services.
C. It is the currency least likely to experience hyperinflation.
D. It is the currency in which funds from financing activities are generated.
Answer:
In general, why do countries wish to avoid double taxation on corporations?
A. The calculations of the taxes are excessively complex.
B. It discourages foreign direct investment.
C. Enforcement of the tax law becomes excessively burdensome.
D. It contributes to accounting diversity.
Answer:
A company that recognizes and adapts its business practices to differences across
cultures in which it operates is referred to as being:
A. geocentric.
B. ethnocentric.
C. polycentric.
D. egocentric.
Answer:
What is the greatest difference between Mexican accounting practice and American
accounting practice?
A. The method of calculating earnings per share
B. The lack of conservatism in Mexican accounting standards
C. The treatment of inflation effects on financial statements
D. The accounting for exchange rate gains and losses
Answer:
Senior management of Bina Confections Ltd., a multinational corporation, has taken a
polycentric approach to manufacturing, marketing, and distributing its candies. What
would be evidence of this perspective?
A. Explicit policy and procedures manuals for managing foreign operations
B. High degree of decentralization of decision-making authority
C. Standard product branding and packaging throughout the organization
D. Implementing strategies perfected by managers at the home office
Answer:
Which of the following is a main function of internal auditing in multinational
corporations?
A. Preparing the annual report to corporate shareholders
B. Selecting independent members for the board of directors
C. Helping external auditors with the financial statement audit
D. Monitoring risks and assessing their effect on the company
Answer:
In the context of multinational corporations, the United States, Japan, and members of
the European Union are collectively known as the:
A. G8.
B. Commonwealth.
C. triad.
D. OECD.
Answer:
Under what circumstance should a German company prepare its financial statements
under German GAAP rather than international financial reporting standards?
A. Reporting to banks
B. Reporting consolidated financial statements
C. Calculating tax
D. German GAAP should always be used instead of IRFS.
Answer:
What explains the reason for the historically very low (1/3% to 1/2%) limit on
allowance for doubtful accounts in China?
A. The primary customer in China was the government, which was presumed to have
very good credit.
B. This is the international accounting standard for companies operating in eastern
Asia.
C. Prior to being admitted to the World Trade Organization (WTO), China was required
to reduce its bad debt level.
D. All of the above
Answer:
What is the primary advantage of a negotiated transfer price?
A. It is objectively determined.
B. It reflects managers’ ability to control cost.
C. It is based on arms-length transactions with unrelated parties.
D. It preserves managerial autonomy to make decisions.
Answer:
Under U.S. GAAP, a deferred tax asset must be realized when:
A. realization is probable.
B. realization is possible.
C. realization is more likely than not.
D. realization is greater than 75% likely.
Answer:
GRI stands for:
A. Global Research Initiative.
B. Global Reporting Initiative.
C. Greenhouse Reporting for Industries.
D. Greenhouse Regulation Initiative.
Answer:
Under IAS 12, Income Taxes, which of the following issues are covered?
A. Temporary differences
B. Operating loss carry forwards
C. Tax credit carry forwards
D. All of the above
Answer:
What term should be used to describe the current economic system in the People’s
Republic of China?
A. Communist
B. Socialist market
C. Totalitarian
D. Free enterprise
Answer:
When a transfer price is set by the management of a parent company rather than by the
subsidiary managers, what kind of transfer price is being used?
A. Market-based transfer price
B. Negotiated transfer price
C. Discretionary transfer price
D. Cost-based transfer price
Answer:
What term is used to refer to presenting the financial statements for a group of
enterprises as if it was a single entity?
A. Harmonization
B. Translation
C. Consolidation
D. Transformation
Answer:
In a recent survey, what issue did 30% percent of respondents identify as the most
important international tax issue they face?
A. Foreign currency translation of taxable income
B. Double taxation
C. Transfer pricing
D. Withholding taxes
Answer:
What is a “contingent asset?”
A. There is no such thing, in IASB standards, as a “contingent asset.”
B. This is an asset that has been put up as collateral against a loan.
C. This is a possible inflow of resources arising from a future activity.
D. It is a probable asset, arising from past events, whose existence is yet to be
confirmed definitively by a future event.
Answer:
Under U.S. GAAP and IASB standards, the threshold for determining ‘significant
influence” in an associate enterprise is:
A. 50% ownership of voting shares.
B. 5% ownership of voting shares.
C. 20% ownership of voting shares.
D. 10% ownership of voting shares.
Answer:
Timeliness of financial statements varies across nations. Which of the following
countries has financial statements issued closest to year-end (on average)?
A. Japan
B. Germany
C. Canada
D. Italy
Answer:
In which of the following countries do companies tend to provide the most extensive
reporting on climate change?
A. Canada
B. The United States
C. The United Kingdom
D. Japan
Answer:
What is a “holding gain?”
A. The increase in owners’ equity resulting from maintaining monetary assets during a
period of inflation
B. The increase in income resulting from general purchasing power accounting during
a period of inflation
C. The increase in owners’ equity resulting from holding nonmonetary assets during a
period of inflation
D. The increase in income caused by paying liabilities with cheaper dollars
Answer:
What term does IAS 11 use for “a contractual arrangement whereby two or more parties
having joint control have right to the net assets of the arrangement”?
A. Merger
B. Consolidation
C. Joint venture
D. Business combination
Answer:
De jure harmonization refers to the process of:
A. making accounting practices consistent across countries.
B. making accounting regulations consistent internationally.
C. resolving accounting differences through jury trials.
D. eliminating the need to have different accounting methods.
Answer:
According to Gray, which characteristic influences Spain’s accounting values and
reporting?
A. Transparency
B. Secrecy
C. Flexibility
D. Optimism
Answer: