What is an advance pricing agreement?
A. A transfer price that is negotiated between two divisions of a decentralized
organization
B. A transfer pricing method accepted by the IRS before an intercompany transaction is
completed
C. A contract between a parent company and a foreign subsidiary to complete a
transaction at a specified future price
D. A foreign currency firm commitment with payment before delivery of the product
Answer:
Which of the following is NOT a key driver of audit quality based on the 2008 U.K.
FRC publication “The Audit Quality Framework”?
A. The composition of a company’s audit committee
B. The culture within an audit firm
C. The effectiveness of the audit process
D. The skills and personal qualities of audit partners and staff
Answer:
Which of the following is a nonderivative hedging instrument?
A. Forward contract on foreign currency
B. Foreign currency call option
C. Foreign currency borrowing
D. Foreign currency put option
Answer:
The Intergovernmental Panel on Climate Change (IPCC) has found that the
concentration of atmospheric carbon dioxide has increased by how much in the past 250
years?
A. 150%
B. 65%
C. 35%
D. 100%
Answer:
The comparable uncontrolled transaction (CUT) method is one alternative for
determining an arm’s-length transfer price for what kind of intercompany transaction?
A. Interest on intercompany loans
B. Sale of tangible property
C. Licenses of intangible property
D. Intercompany services
Answer:
What is likely to be the source of accounting standards in common law countries?
A. Tax law
B. Non-government entities such as the FASB
C. Federal and local legislatures
D. The International Accounting Standards Board
Answer:
In the years between 1990 and 2001 when global gross domestic product rose 27%,
what was the growth in global exports?
A. 25%
B. 75%
C. 35%
D. 50%
Answer:
Under the current rate method of translating foreign currency financial statements, what
exchange rate should be used for cost of goods sold?
A. Spot rate at the end of the year
B. Average rate during the year
C. Spot rate mid-year
D. There is no single rate because beginning and ending inventory must be converted at
different exchange rates than purchases.
Answer:
How should we recognize the difference in the value of a receivable in a foreign
currency at the time it was recorded and the time the cash was received?
A. As an adjustment to stockholders’ equity
B. As an adjustment to purchases
C. As an extraordinary capital expenditure
D. As a prior period adjustment
Answer:
What is KPMG?
A. It is a Dutch manufacturing company with plants in over 50 countries worldwide.
B. It is an international public accounting firm.
C. It is the largest of the multinational corporations listed on the NYSE.
D. It is a governmental agency whose aim is promoting international business.
Answer:
What amount should be used to consolidate Placo’s cost of goods sold into Limko’s
income statement under the temporal method?
A. $443,900
B. $437,600
C. $432,500
D. $448,000
Answer:
Which of the following countries requires companies to use current replacement cost
accounting to prepare primary financial statements?
A. The Netherlands
B. Mexico
C. Brazil
D. None of the above
Answer:
During the 1990’s, a major problem in evaluating the financial statements of Eastern
European companies that had been under the control of the Soviet Union was:
A. that the statements had been used for government planning rather than for private
investors.
B. that few people spoke the languages in which the financial statements were written.
C. that East European currencies had been greatly devalued relative to the U.S. dollar.
D. that financial reporting had not been done since the Bolshevik Revolution.
Answer:
Under IAS 19, Employee Benefits, which of the following benefits are covered?
A. Compensated absences and bonuses
B. Post-employment benefits
C. Deferred compensation and disability benefits
D. All of the above
Answer:
Which of the following is generally true about the differences between U.S. GAAP and
IFRS?
A. U.S. GAAP is more flexible than IFRS.
B. U.S. GAAP tends to be more rules-based and IFRS tend to be principles-based.
C. More professional judgment is required to apply U.S. GAAP than is required for
implementing IFRS.
D. In all cases, U.S. GAAP is more detailed than the IFRS.
Answer:
The following information was taken from the fixed asset records of Bosco Ltd. as of
December 31, 2010:
Using IAS 36, what is the amount of impairment loss?
A. €18,000
B. €37,000
C. €15,000
D. €25,000
Answer:
How can foreign corporations alleviate the accounting diversity problem related to
comparing foreign financial statements?
A. Presenting multiple sets of financial statements under various GAAP
B. Selecting a widely used set of accounting standards for their financial reporting
C. Providing adequate disclosure in notes to the financial statements to allow analysts
to make conversions to another country’s GAAP
D. All of the above
Answer:
What is the general rule for international transfer pricing advocated by the Organization
for Economic Cooperation and Development (OECD)?
A. Cost-based prices
B. Negotiated prices
C. Arm’s-length prices
D. Discretionary prices
Answer:
How should currency translation be done in order to conveniently compare a financial
statement presented in Japanese yen to a financial statement presented in Chinese
yuan?
A. The temporal method should be used.
B. The historical exchange rates should be used to convert financial statement amounts.
C. All amounts should be converted at the current exchange rate.
D. Current year statements should be converted at the current exchange rate, and prior
year statements should be converted at prior year exchange rate.
Answer:
How would a company decide which foreign languages will be used to present its
financial statements?
A. Determine which language is closest to the local language so that translation is less
costly.
B. Choose the language based on which countries provide the greatest potential source
of funds.
C. Follow the language requirements of its local accounting regulatory agency.
D. Select the language of the most populous country in its region of the world.
Answer:
MSM Ltd has a strategy of being the first to market with new products and so it
measures the number of new products introduced each year. Where does this measure
fit in the balanced scorecard?
A. Financial perspective
B. Customer perspective
C. Internal business process perspective
D. Innovation and learning perspective
Answer:
Amazing Corporation, a U.S. enterprise, sold product to a customer in Wales on
October 1, 20×1 for £100,000 with payment required on April 1, 20×2. Relevant
exchange rates are:
The discount factor corresponding to the company’s incremental borrowing rate for 6
months is 0.95.
Assuming that Amazing Corporation does not hedge this transaction, what is the
amount of exchange gain or loss that it should show on its December 31, 20×1 income
statement?
A. Loss $1,000
B. Loss $2,000
C. Gain $1,000
D. Gain $1,900
Answer:
According to a U.S. General Accounting Office report, what percent of
foreign-controlled corporations paid no federal income tax in the period 1998-2005?
A. 22%-27%
B. 35%-45%
C. 66%-72%
D. 80%-92%
Answer:
What set of standards must companies listed on the stock exchange in the United
Kingdom use for consolidated financial statements?
A. U.K. GAAP
B. U.K. GAAP or U.S. GAAP
C. IFRS adopted by the European Union
D. There is no specific requirement.
Answer:
According to surveys in the U.S. and the United Kingdom, what are the most frequently
used financial measures to evaluate subsidiary performance by MNCs?
A. Stock price, return on investment, profit
B. Budgeted profit vs. actual profit, stock price, sales
C. Budgeted profit vs. actual profit, return on investment, profit
D. Internal rate of return, profit, return on investment
Answer:
In terms of level of detail provided in the individual financial statements, the U.S. tends
to:
A. emphasize more line items on the face of the financial statements.
B. rely less on footnote disclosure.
C. condense the amount of line items and supplement with more footnote detail.
D. use footnotes only when absolutely required by GAAP.
Answer:
Which of the following statements is true of the relationship between foreign currency
transactions, exchange rate changes, and foreign exchange gains and losses?
A. In an export sales, depreciation of the foreign currency causes a foreign exchange
gain.
B. In an import purchase, appreciation of the foreign currency causes a foreign
exchange gain.
C. In an import purchase, depreciation of the foreign currency causes a foreign
exchange loss.
D. In an export sales, appreciation of the foreign currency causes a foreign exchange
gain.
Answer:
Why do financial analysts and other readers of financial statements want segmented
information?
A. Consolidation obscures facts that may be important for evaluating financial
statements.
B. More information is always preferred to less information.
C. To ensure that illegal business combinations are not taking place.
D. Models for economic forecasting have not been developed using consolidated
financial statement information.
Answer:
What entity is primarily responsible for setting accounting and financial reporting
standards in Mexico?
A. Mexican Institute of Public Accountants (MIPA)
B. National Banking and Securities Commission (NBSC)
C. Bolsa Mexicana de Valores (BMV)
D. International Accounting Standards Board
Answer:
What is OIBD?
A. This is the Organization of International Boards of Directors, which is attempting to
harmonize accounting standards.
B. It stands for “operating income before depreciation,” which some analysts
recommend to remove the effect of international accounting standard diversity.
C. It is the Organization of International Bond Dealers, whose financial analysts
developed EBITDA.
D. None of the above
Answer:
What is the intent of IFRS 1?
A. To establish the guidelines for financial statement presentation
B. To provide the working definitions of accounting elements
C. To provide guidance on first-time application of IFRS
D. To provide the framework for setting international accounting standards
Answer:
What was a key finding of the 2007 Stern Report in the United Kingdom on the
Economics of Climate Change?
A. The costs of extreme weather over the next few decades could reach 0.5% to 1% of
world GDP per annum.
B. Climate change should promote forced savings over the next few decades.
C. Climate change bears little, if any correlation to economic disruption.
D. The costs of extreme weather over the next few decades could reach 10% to 15% of
world GDP per annum.
Answer:
Why is it believed that Japanese companies prefer the payback period over the
discounted cash flow methods for evaluating capital investment alternatives?
A. It is consistent with their corporate strategy of investing in new technology.
B. Japanese companies compete using very short product life cycles.
C. Cash flows over a long period of time are difficult to predict with much accuracy.
D. All of the above
Answer:
While German tax computations are based on financial accounting standards, this is not
true in the United Kingdom. Why doesn’t the U.K. base its tax code on financial
accounting standards?
A. The United Kingdom tries to avoid being like Germany whenever it can.
B. The United Kingdom had a tax code long before it had financial accounting
standards.
C. Financial accounting standards in the United Kingdom are too conservative to be
practical for tax purposes.
D. Germany follows the directives of the European Union, whereas the United
Kingdom has not adopted the directives of the EU.
Answer: