38.
Royalties represent the remuneration paid to the owners for the use of
technology or the right to manufacture and/or sell products under patents
or trade names.
TRUE
Royalties represent the remuneration paid to the owners of technology,
patents, or trade names for the use of that technology or the right to
manufacture and/or sell products under those patents or trade names.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 20-07 Understand the basic techniques for global money management.
Topic: Financial Management: Global Money Management
39.
A fee is compensation for professional services or expertise supplied to a
foreign subsidiary by the parent company or another subsidiary.
TRUE
A fee is compensation for professional services or expertise supplied to a
foreign subsidiary by the parent company or another subsidiary.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 20-07 Understand the basic techniques for global money management.
Topic: Financial Management: Global Money Management
40.
Firms cannot use transfer prices to move funds from a subsidiary to the
parent company when financial transfers in the form of dividends are
blocked by host-country government policies.
FALSE
A firm can use transfer prices to move funds from a subsidiary to the parent
company (or a tax haven) when financial transfers in the form of dividends
are restricted or blocked by host-country government policies.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 20-07 Understand the basic techniques for global money management.
Topic: Financial Management: Global Money Management
Multiple Choice Questions
41.
Which of the following is an accounting problem that only international
businesses face?
A.
Lack of consistency in the accounting standards
B.
Inaccurate filing of profit-and-loss statements
C.
False reporting of income to the government
D.
International businesses face a number of accounting problems that do not
confront purely domestic businesses. The lack of consistency in the
accounting standards of different countries is one such problem.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 20-01 Discuss the national differences in accounting standards.
Topic: Introduction
42.
In countries such as the United States and Britain, firms typically raised
capital by _____.
A.
obtaining funding from the government
B.
borrowing money from national banks
C.
issuing stock or bonds to investors
D.
borrowing money from international banks
In countries where there were well-developed capital markets, such as the
United States and Britain, firms typically raised capital by issuing stock or
bonds to investors.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 20-01 Discuss the national differences in accounting standards.
Topic: National Differences in Accounting Standards
43.
Historically, financial reports prepared by firms in Germany _____.
A.
reveal less information than reports of British or U.S. firms
B.
contain detailed information required by individual investors
C.
overvalued assets and undervalued liabilities
D.
made more public disclosures compared to firms in other countries
In Germany and Switzerland the banks emerged as the main providers of
capital to enterprises. Bank officers often sat on the boards of these
companies and were privy to detailed information about their operations
and financial position. As a consequence, there were fewer demands for
detailed accounting disclosures, and public accounts tended to reveal less
information.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 20-01 Discuss the national differences in accounting standards.
Topic: National Differences in Accounting Standards
44.
Which of the following is a country in which banks emerged as the main
providers of capital to enterprises?
A.
United States
B.
Britain
C.
Philippines
D.
Switzerland
In Germany and Switzerland the banks emerged as the main providers of
capital to enterprises. Bank officers often sat on the boards of these
companies and were privy to detailed information about their operations
and financial position. As a consequence, there were fewer demands for
detailed accounting disclosures, and public accounts tended to reveal less
information.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 20-01 Discuss the national differences in accounting standards.
Topic: National Differences in Accounting Standards
45.
Accounting standards _____.
A.
are rules for preparing financial statements
B.
define the levels of tax-payments needed
C.
specify the rules for performing an audit
D.
refer to the technical process of balancing accounts
Accounting standards are rules for preparing financial statements. They
define what is useful accounting information.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 20-01 Discuss the national differences in accounting standards.
Topic: National Differences in Accounting Standards
46.
The technical process by which an independent person gathers evidence for
determining if financial accounts conform to required accounting standards
is known as _____.
A.
standardization
B.
an audit
C.
reporting
D.
a benchmark
An audit is the technical process by which an independent person (the
auditor) gathers evidence for determining if financial accounts conform to
required accounting standards and if they are also reliable.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 20-01 Discuss the national differences in accounting standards.
Topic: National Differences in Accounting Standards
47.
Transnational financing occurs when a firm based in one country enters
another country to raise capital _____.
A.
by borrowing from financial institutions
B.
from the sale of stocks or bonds
C.
by borrowing from banks
D.
through exchange policies of governments
Transnational financing occurs when a firm based in one country enters
another country’s capital market to raise capital from the sale of stocks or
bonds.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 20-01 Discuss the national differences in accounting standards.
Topic: National Differences in Accounting Standards
48.
A German firm raising capital by selling stock through the London Stock
Exchange is an example of _____.
A.
transnational financing
B.
service export
C.
indirect financing
D.
transnational investment
Transnational financing occurs when a firm based in one country enters
another country’s capital market to raise capital from the sale of stocks or
bonds.
AACSB: Analytic
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 20-01 Discuss the national differences in accounting standards.
Topic: National Differences in Accounting Standards
49.
The International Accounting Standards Board _____.
A.
can issue a new accounting standard if majority of the board members
agree
B.
was formed to replace the Financial Accounting Standards Board
C.
proposes standards but has no power to enforce the standards
D.
was formed to supervise the accounting practices that U.S. firms follow
The International Accounting Standards Board (IASB) has emerged as a
major proponent of standardization. However, the IASB has no power to
enforce its standards.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 20-02 Explain the implications of the rise of international accounting standards.
Topic: International Accounting Standards
50.
The _____ writes the generally accepted accounting principles (GAAP) that
govern the financial statements of U.S. firms.
A.
US Securities and Exchange Commission
B.
Office of Economic Analysis
C.
International Accounting Standards Board
D.
Financial Accounting Standards Board
The FASB writes the generally accepted accounting principles (GAAP) by
which the financial statements of U.S. firms must be prepared.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 20-02 Explain the implications of the rise of international accounting standards.
Topic: International Accounting Standards
51.
Most international businesses require all budgets and performance data
within the firm to be expressed in the “corporate currency,” which is
normally _____.
A.
a common currency such as the U.S. dollar
B.
the home currency
C.
a foreign currency
D.
the currency of the country where products are sold
Most international businesses require all budgets and performance data
within the firm to be expressed in the “corporate currency,” which is
normally the home currency.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 20-03 Explain how accounting systems affect control systems within the multinational enterprise.
Topic: Accounting Aspects of Control Systems
52.
According to Lessard-Lorange model, _____ rate refers to the spot exchange
rate when the budget is adopted.
A.
ending
B.
initial
C.
ideal
D.
projected
Lessard and Lorange point out three exchange rates that can be used to
translate foreign currencies into the corporate currency in setting budgets
and in the subsequent tracking of performance. One of them is the initial
rate, the spot exchange rate when the budget is adopted.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 20-03 Explain how accounting systems affect control systems within the multinational enterprise.
Topic: Accounting Aspects of Control Systems
53.
According to Lessard-Lorange model, _____ is the spot exchange rate
forecast for the end of the budget period.
A.
projected
B.
initial
C.
ideal
D.
ending
Lessard and Lorange point out three exchange rates that can be used to
translate foreign currencies into the corporate currency in setting budgets
and in the subsequent tracking of performance. One of them is the
projected rate, the spot exchange rate forecast for the end of the budget
period.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 20-03 Explain how accounting systems affect control systems within the multinational enterprise.
Topic: Accounting Aspects of Control Systems
54.
According to Lessard-Lorange model, ending rate is the spot exchange
rate:
A.
forecast for the end of the budget period.
B.
when the budget is adopted.
C.
when no formal exchange rate exists.
D.
when the budget and performance are being compared.
Lessard and Lorange point out three exchange rates that can be used to
translate foreign currencies into the corporate currency in setting budgets
and in the subsequent tracking of performance. One of them is the ending
rate, the spot exchange rate when the budget and performance are being
compared.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 20-03 Explain how accounting systems affect control systems within the multinational enterprise.
Topic: Accounting Aspects of Control Systems
55.
Which of the following combinations of exchange rates was ruled out by
Lessard and Lorange as illogical and unreasonable?
A.
Translating budget using ending rate and translating actual performance
using initial rate
B.
Translating both actual performance and budget using projected rate
C.
Translating both actual performance and budget using initial rate
D.
Translating budget using projected rate and translating actual
performance using ending rate
Lessard and Lorange ruled out four of the nine possible combinations they
proposed as illogical and unreasonable. It would make no sense to use the
ending rate to translate the budget and the initial rate to translate actual
performance data.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 20-03 Explain how accounting systems affect control systems within the multinational enterprise.
Topic: Accounting Aspects of Control Systems
56.
Of the five combinations, Lessard and Lorange recommend that firms use
the _____ spot exchange rate to translate both the budget and performance
figures into the corporate currency.
A.
ending
B.
initial
C.
final
D.
projected
Of the five combinations, Lessard and Lorange recommend that firms use
the projected spot exchange rate to translate both the budget and
performance figures into the corporate currency, combination PP.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 20-03 Explain how accounting systems affect control systems within the multinational enterprise.
Topic: Accounting Aspects of Control Systems
57.
When using the projected spot exchange rate to translate both the budget
and performance figures into the corporate currency, the projected rate in
such cases will typically be the _____.
A.
forward exchange rate as determined by the foreign exchange market
B.
exchange rate that exists at the start of a project
C.
exchange rate when the budget was prepared
D.
transfer price that a firm will offer to one or more of its subsidiaries
Of the five combinations, Lessard and Lorange recommend that firms use
the projected spot exchange rate to translate both the budget and
performance figures into the corporate currency. The projected rate in such
cases will typically be the forward exchange rate as determined by the
foreign exchange market or some company-generated forecast of future
spot rates, which Lessard and Lorange refer to as the internal forward rate.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 20-03 Explain how accounting systems affect control systems within the multinational enterprise.
Topic: Accounting Aspects of Control Systems
58.
Lessard and Lorange refer company-generated forecast of future spot rates
as _____ rate.
A.
forward exchange rate
B.
internal forward rate
C.
initial exchange rate
D.
ending exchange rate
Company-generated forecast of future spot rates are used as projected rate
in some instances. Lessard and Lorange refer to which as the internal
forward rate.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 20-03 Explain how accounting systems affect control systems within the multinational enterprise.
Topic: Accounting Aspects of Control Systems