What is a key objective of a company’s performance evaluation system?
A. To determine how much to pay executives in bonuses and other compensation
B. To ensure that the domestic and foreign operations are achieving their objectives
C. To control foreign subsidiaries
D. To assess the effect of foreign exchange rates on published financial statements
Answer:
According to IAS 16, a decrease in the carrying amount of a fixed asset that is
identified on an asset’s first revaluation should be recorded as:
A. an expense on the income statement.
B. a prior period adjustment to retained earnings.
C. a credit to Revaluation Surplus.
D. a debit to Revaluation Surplus.
Answer:
Why is management control particularly complex in decentralized multinational
organizations?
A. Managers abroad are not as well-trained as managers of domestic operations.
B. Decision-making authority is not delegated to the local managers of foreign
operations.
C. Managers of foreign operations may be motivated by local goals rather than parent’s
goals.
D. Financial risks are always higher for the local managers of foreign operations than
for managers of domestic operations.
Answer:
What reason has been given to explain the lack of well-developed auditing professions
in less developed economies?
A. Inability to train auditors given the lack of educational systems.
B. Since creditors and investors are not major players in these economies, there is little
need for audited financial statements.
C. Investors and creditors in these countries do not want external auditors attesting to
financial statement reliability.
D. In these cultures, financial statements are presumed to be accurate and therefore do
not require independent audits.
Answer:
What was the 2002 finding by the six largest public accounting firms regarding
International Financial Reporting Standards?
A. Of the countries surveyed, almost all intended to make their GAAP converge with
IFRS.
B. Very few of the countries studied planned to move their national accounting
standards toward convergence with IFRS.
C. There were almost as many convergence strategies as there were countries in the
study.
D. The countries that planned to make their GAAP converge with IFRS were
predominantly western European nations.
Answer:
Excel Sources Inc. is a U.S. incorporated company. Due to change in exchange rate, it
receives $150,000 as payment against a sale of $165,000. Under the two-transaction
perspective:
A. no journal entry will be prepared on the date of sale.
B. the sale will be recorded at $150,000 on the date of sale.
C. foreign exchange loss will be recorded for $15,000.
D. Accounts Receivable will be debited for $15,000 on the date of payment.
Answer:
What term is used to describe a foreign corporation in which U.S. shareholders hold
more than 50% of the voting power or fair market value of the corporation’s stock?
A. Branch
B. Holding company
C. Controlled foreign corporation
D. Tax-exempt foreign corporation
Answer:
What impact did the Asian financial crisis in the late 1990s and the corporate scandals
in the United States in this century have on the auditing profession?
A. Regulation of the external auditing profession was reduced.
B. CPAs were no longer allowed to provide external audit services for multinational
corporations.
C. Reputation for being the watchdogs of financial reporting integrity was reduced.
D. External auditors were required to sit on the boards of directors of multinational
corporations.
Answer:
The following data relates to Alpha Inc. and Sigma Solutions:
Which of the following statements is true of Alpha and Sigma?
A. Sigma Solutions is more multinational as its ratio of foreign sales to total sales is
more than Alpha Inc.
B. Alpha Inc. is more multinational as its ratio of foreign employment to total
employment is more than Sigma Solutions.
C. Sigma Solutions has a higher multinationality index than that of Alpha Inc.
D. Alpha Inc. has a higher multinationality index than that of Sigma Solutions.
Answer:
What is the purpose of the IFAC’s Sustainability Framework?
A. To target professional accountants who can influence integration of sustainability
into organizations’ objectives, strategies, management, and definition of success
B. To promote global adoption of GRI
C. To target elected officials who can influence integration of sustainability into
organizations’ objectives, strategies, management, and definition of success
D. To integrate the concept of sustainability into the Accounting Framework
Answer:
In addition to the 16 Chinese Accounting Standards, what else forms the structure of
financial reporting in modern China?
A. IFRS
B. U.S. GAAP
C. ASBE
D. CICPA
Answer:
Why is public disclosure of financial information less important in Japan than in other
industrialized countries?
A. Very few corporations
B. Undeveloped stock exchange
C. Heavy reliance on bank financing
D. Strong government control of corporations
Answer:
Which of the following is a key additional component of the U.K.’s true and fair view?
A. Professional judgment
B. Prudence
C. Historical cost
D. Loss bias
Answer:
King’s Bank, a British company, purchases market research services from Harris
Interactive, a U.S. company. As per the terms of the contract, payment is to be made
three months later in U.S. dollars when the report is delivered. How would King’s Bank
like to see the exchange rate move, assuming it isn’t hedging the transaction?
A. It hopes that the U.S. dollar appreciates in value against the British pound.
B. It hopes that the British pound appreciates in value against the U.S. dollar.
C. It makes no difference, since they are the customer and the sale takes place in the
U.K.
D. It hopes that there is no change between the spot rate and the forward rate.
Answer:
Conceptually, what is the internal rate of return?
A. Number of years required for a project to return the cash invested in it
B. Discount rate that equates the present value of cash inflows to present value of cash
outflows
C. Interest rate a company can generate on its corporate bonds and preferred stock
D. Average annual net income divided by initial investment in a project
Answer:
Why is the accrual method of accounting for unrealized foreign exchange gains
sometimes criticized?
A. Foreign exchange gains almost never occur, so there is no reason to have an
accounting standard for it.
B. It violates the principle of conservatism.
C. It is not objective.
D. There is no reliable method for measuring unrealized foreign exchange gains.
Answer:
A multinational corporation may attempt to minimize the taxes it pays in a country with
a high effective tax rate by setting a very high transfer price on goods transferred to a
subsidiary in a high-tax country. Why is this often not successful?
A. Laws in the foreign country may prohibit such a scheme.
B. The high transfer price would actually increase taxes.
C. Foreign exchange losses will eliminate any tax savings.
D. None of the above
Answer:
Under the American Jobs Creation Act of 2004, how many FTC baskets are used to
classify foreign source income?
A. 9
B. 2
C. 12
D. 11
Answer:
What is the term used for intercompany transactions from a parent to a subsidiary?
A. Horizontal transfer
B. Downstream transfer
C. International transfer
D. None of the above
Answer:
What is the advantage of foreign direct investment?
A. Helps in retaining advantage over competition
B. Reduces transportation costs
C. Creates a company tailored to a foreign market’s unique characteristics
D. All of the above
Answer:
For what reason are the transfer prices of imports more closely monitored worldwide
than are exports?
A. Political implications
B. Effect on local job availability
C. Impact on a country’s balance of trade
D. All of the above
Answer:
Why would the management of a multinational corporation incur real costs to hedge
accounting exposure, which is only on paper?
A. Fluctuations in reported income may affect stock price.
B. Management compensation may be tied to accounting income.
C. Hedging can smooth income.
D. All of the above
Answer:
According to IAS 37, how should contingent assets be recognized?
A. They should be disclosed in the notes to the financial statements if the inflow of
resources is probable.
B. They should be recognized like any other asset, with a debit to “contingent assets.”
C. They should not be disclosed anywhere in the financial statements due to their
uncertainty.
D. They should only be disclosed in the notes to the financial statements if the inflows
of resources are virtually certain.
Answer:
Which method of accounting for changing prices (inflation) reflects current
replacement cost of specific assets?
A. Current replacement cost method
B. General purchasing power method
C. Temporal method
D. Current rate method
Answer:
According to FASB ASC 830, Foreign Currency Matters, which of the following
conditions would indicate that a foreign subsidiary’s functional currency is the parent
company’s currency?
A. Active local sales market
B. Sales price not affected by changes in exchange rate in the short-run
C. High volume of intercompany transactions
D. All of the above are indicators that the functional currency is the parent company’s
currency.
Answer:
International accounting diversity can be found in terms of:
A. the terminology used in the financial statements.
B. the amount of information disclosed in the financial statements.
C. the order of items in the financial statements.
D. All of the above evidence of accounting diversity.
Answer:
On May 1, 20×1, Ustar purchased a put option to sell £50,000 on April 30, 20×2 at a
strike price equal to $2, which was the spot rate on May 1, 20×1. Ustar paid a premium
of $0.01 per pound. How should the option be recorded on May 1, 20×1?
A. Debit Foreign Currency Option for $100,500.
B. Credit Foreign Currency Option for $100,500.
C. Debit Foreign Currency Option for $500.
D. Debit Hedge Expense for $500.
Answer:
What is meant by Germany’s “authoritative principle?”
A. The GASB is the final authority for accounting standards.
B. The International Accounting Standards Board is the authority for making German
GAAP.
C. Financial statements are the basis for determining tax.
D. Accounting standards are derived from tax law.
Answer:
Under the Kyoto Protocol, what mechanism is used to promote emissions reduction in
developing countries?
A. Clean Development Mechanism (CDM)
B. Clean Air Initiative (CAI)
C. The Kyoto Protocol only focuses on developed countries.
D. None of the above
Answer:
How should multinational corporations reduce economic exposure?
A. Hedging foreign currency using a call option
B. Hedging foreign currency using put options
C. Competitive strategic and operational decisions
D. Forward contracts on the foreign currency
Answer:
Under Securities and Exchange Commission regulations, who may be a member of an
audit committee for a listed company?
A. Any member of the corporate board of directors
B. Any member of the corporate board of directors who is not a Certified Public
Accountant (CPA)
C. Only members of the corporate board of directors who do not have a material
interest in the company
D. Any manager or director of the corporation
Answer:
Under IAS 32, how should an equity instrument be classified?
A. It must always be classified as equity by its very nature.
B. The entity has the option of classifying it as a liability or equity.
C. If it contains a contractual obligation that meets the definition of a financial liability,
it should be classified as a liability.
D. The entity should apportion the classification between liability and equity if there is
a contractual obligation that meets the definition of a financial liability.
Answer: