Under what condition does the IRS consider the resale price method acceptable as a
transfer price?
A. The subsidiary is a foreign controlled corporation.
B. The related party is merely a distributor of finished goods.
C. The divisions are part of a decentralized organization.
D. There is no market price upon which to base the transfer price.
Answer:
Who is regarded the main user of accounting information in China?
A. Listed companies
B. Banks
C. Investors
D. The government
Answer:
Excellent Corp., a foreign company, is listed in the U.S. stock exchange. It follows
Local GAAP. The income statement of Excellent Corp. reported £165 as indirect costs
related to inventory. The Local GAAP treats these as operating expense. When
reconciling Excellent Corp’s financial statements to U.S. GAAP, how should be these
indirect costs treated?
A. These should be treated as operating expenses in the period in which they are
incurred.
B. These costs are treated as product costs and are expensed as cost of goods sold when
inventory is sold.
C. The entire amount will be shown on the liability side of the balance sheet.
D. This amount should be adjusted through the revaluation of inventories.
Answer:
In which of the following countries is the use of IFRS NOT allowed for domestic
companies listed on its stock exchanges?
A. United Kingdom
B. Yugoslavia
C. Australia
D. United States
Answer:
The Securities and Exchange Law (SEL) is one of the regulators of accounting and
financial reporting in Japan. The SEL is modeled on the regulations of which U.S.
entity?
A. Securities and Exchange Commission
B. Financial Accounting Standards Board
C. American Institute of Certified Public Accountants
D. American Accounting Association
Answer:
The following information was taken from the fixed asset records of Bosco Ltd. as of
December 31, 2010:
Under U.S. GAAP, if the carrying value of a fixed asset was $50,000, the undiscounted
expected future cash flows was $55,000, the discounted expected future cash flows was
$51,000, and the selling price was $53,000, what is the amount of impairment loss?
A. $5,000
B. $3,000
C. $1,000
D. $0
Answer:
Nonmonetary assets DO NOT include:
A. fixed assets.
B. inventory.
C. accounts receivable.
D. customer deposits.
Answer:
What is a value added tax (VAT)?
A. It is the European version of a sales tax, which is paid by the purchaser based on
sales price.
B. Taxes used in lieu of sales tax and incorporated into the price of a product or
service.
C. The tax paid by a foreign corporation on its fixed assets.
D. This is the name of the corporate income tax in Canada, Australia, and the United
Kingdom.
Answer:
Which of the following statements is true of IFRS 1?
A. It does not permit the recognition of intangible assets in balance sheets.
B. After its issuance in July 2001, it has not been amended as yet.
C. It deals primarily with fair value measurement of assets.
D. It provides exemptions to complying with IFRS in specific areas.
Answer:
Which of the following is the major limitation of using EBITDA for analyzing foreign
financial statements?
A. It is nearly impossible for most financial analysts to calculate this number.
B. Few analysts understand what this earnings number represents.
C. The excluded items with this approach may have implications for determining the
value of firms under evaluation.
D. It cannot be converted from a foreign currency to a domestic currency.
Answer:
How do Irish companies view annual corporate social reports (CSR)?
A. They greet CSR with skepticism and have ceased to engage in preparing CSR.
B. They embrace CSR as a way of maintaining or reestablishing legitimacy.
C. They are required to prepare CSR under Irish statute.
D. Irish culture demands CSR reports.
Answer:
What explains the “follow-the-leader” effect of countries changing their corporate tax
rates in response to changes made by other countries?
A. Harmonization of accounting standards
B. Competition for foreign investment
C. Currencies pegged to another country’s currency
D. None of the above
Answer:
Which of the following calculations will yield return on investment (ROI)?
A. Annual net income/book value of investment
B. Average annual net income/book value of investment
C. Average annual net income/present value of investment
D. Book value of investment/annual net income
Answer:
Which of the following is NOT an objective of the International Accounting Standards
Board?
A. To establish worldwide uniformity of accounting practice
B. To develop a single set of enforceable global accounting standards
C. To promote the use and application of global accounting standards
D. To encourage convergence of national accounting standards and international
accounting standards
Answer:
The People’s Republic of China (PRC) made economic reforms in the 1980s to
encourage international trade. What impact have these reforms made on accounting?
A. Increased the demand for accounting information from investors
B. Increased the supply of publicly available accounting information from Chinese
companies
C. Changed the nature of auditing in the PRC
D. All of the above are true.
Answer:
Under U.S. GAAP, fixed assets are generally reported on the balance sheet at their:
A. historical cost.
B. net realizable value.
C. fair value.
D. market value.
Answer:
When a foreign subsidiary pays dividends to its U.S. parent, this process is known as:
A. repatriation.
B. the reverse authoritative principle.
C. income-splitting.
D. asset management.
Answer:
The ownership and control of foreign assets, such as a manufacturing plant, is called:
A. a hedge.
B. foreign direct investment.
C. an option.
D. derivatives.
Answer:
What is the position of the U.S. Securities and Exchange Commission (SEC) with
respect to internal auditing?
A. It requires all companies, including foreign enterprises, listed on U.S. stock
exchanges to have an internal audit function.
B. Since 2000, the SEC has been silent with respect to internal auditing.
C. Internal auditing is recommended by the SEC, but it is not required for listed
companies.
D. Only multinational companies are required to have internal auditing systems.
Answer:
Why does German accounting practice differ from IFRS?
A. German accounting rules are much more specific in most areas than IFRS.
B. German accounting law is less specific in some respects than IFRS.
C. Germany has not adopted a policy on accounting standard harmonization.
D. Germany is not interested in foreign direct investment.
Answer:
A bank exchanging foreign currency makes its profit in what manner?
A. On the difference between the spot rate and the foreign rate
B. A bank is forbidden, by law, to charge a premium in foreign currency exchange
C. On the present value of the forward rate discounted to the date an option is
purchased
D. On the difference between the buying and selling rates
Answer:
In designing an effective management control system for a multinational corporation,
the accountant should measure factors appropriate for each unit’s level of responsibility.
Which of the following measures would be appropriate for evaluating the performance
of a cost center?
A. Return on investment
B. EBIT
C. Output volume
D. Residual income
Answer:
What term is used to describe the circumstances under which Amazing Corporation is
entering the forward contract?
A. Hedge of an unrecognized foreign currency firm commitment
B. Hedge of a recognized foreign-currency-denominated asset
C. Hedge of a forecast foreign-currency-denominated transaction
D. Hedge of net investment in foreign operations
Answer:
An indirect foreign tax credit arises when:
A. taxes paid by a parent on foreign branch income is deducted from taxes owed to the
parent’s home country.
B. taxes paid by a foreign subsidiary are taken as a credit against a parent’s taxes when
dividends are received from the subsidiary.
C. taxing jurisdictions agree to share the taxes paid by a foreign subsidiary.
D. a foreign taxing jurisdiction does not tax a subsidiary within its jurisdiction and
allows the parent country to tax the foreign source income.
Answer:
Which of the following items should be included in the cost of property, plant, and
equipment under IAS 16?
A. All costs directly attributable to getting the asset to the proper location
B. Import duties and taxes
C. Estimated costs of removing the asset
D. All of these should be considered part of the cost of the asset.
Answer:
In their 1993 paper, Doupnik and Salter found that countries tended to cluster in terms
of the similarities or differences of their accounting systems. These researchers attribute
the large cluster around United Kingdom to:
A. the superiority of the Anglo accounting model.
B. the predominant influence of Great Britain in the world economy.
C. the colonial influence of Great Britain on accounting development.
D. the fact that more of the world’s people speak English than any other language.
Answer:
Which of the following statements is true about performance evaluation in a
multinational organization?
A. A division that is performing poorly indicates that the manager of that division has
performed poorly.
B. Good performance by a division indicates that its manager has been performing to
expectations.
C. Divisional performance is the same as managerial performance.
D. None of the above is true.
Answer:
Correlative relief is a component of the U.S. Model Income Tax Treaty. What is
correlative relief?
A. Additional tax imposed by the IRS related to a transfer pricing audit is offset with a
foreign tax credit in the same amount.
B. When the IRS adjusts an international transfer price, the tax authority in the foreign
country makes a corresponding adjustment.
C. The burden of revising transfer pricing schemes is offset by reduction of the
corporate tax rate on foreign source income.
D. IRS and foreign taxing authorities will collaborate in determining the appropriate
international transfer price.
Answer:
Assume that the Chinese government allowed the yuan to float relative to the U.S.
dollar. Appreciation in the yuan could have an adverse affect on sales of Chinese goods
to the U.S. This possible impact on Chinese exports is referred to as:
A. translation exposure.
B. transaction exposure.
C. economic exposure.
D. accounting exposure.
Answer:
What body regulates trading of corporate securities in the People’s Republic of China?
A. National People’s Congress
B. State Council
C. Securities and Exchange Commission
D. Chinese Security Regulatory Commission
Answer:
Chien Bleu Ltd. purchased a building in 2009 for €10,000,000 and as of December 31,
2015 had recorded accumulated depreciation on the building of €3,000,000. On
December 31, 2015, the company conducted its first revaluation when the fair value
was €12,000,000. According to IAS 16, what account should be credited for
€5,000,000?
A. Loss on RevaluationBuilding
B. Gain From Revaluation of Building
C. Revaluation SurplusBuilding
D. Revaluation RevenueBuilding
Answer:
Under IAS 39, under what circumstances will derecognition of a financial liability
occur?
A. When the obligation has been paid
B. When the obligation has been canceled
C. When the obligation has expired
D. All of the above
Answer:
What is the advantage of Morgan Stanley Dean Witter’s “Apples to Apples” approach to
comparing international financial statement data?
A. It provides complete conversion of foreign financial statements to U.S. GAAP,
which may not be available from the reporting entities themselves.
B. It focuses only on the industry-specific factors MSDW believes are most important
to stock valuation, which eliminates the need for converting complete financial
statements.
C. It is not affected by differences in GAAP across countries.
D. The same measures are used for all industries in all countries, which eliminate
comparability issues.
Answer:
Where is the Secretariat of the GRI located?
A. New York
B. Montreal
C. Amsterdam
D. Vienna
Answer: