Which of the following should NOT be included in implementing performance
evaluation systems?
A. Feedback and review
B. Fair and achievable measures
C. Understandability
D. Changing systems annually
Answer:
How is a foreign subsidiary different from a foreign branch of a domestic corporation?
A. Subsidiaries always generate more foreign source income than branches do.
B. The subsidiary is a company incorporated in the foreign country, whereas a branch
is not a separate corporation.
C. A subsidiary is created to manufacture and distribute products in foreign markets,
whereas a branch’s only function is sales in the foreign market.
D. The income of a subsidiary is taxable by the country where it is located, but branch
income is not subject to tax by the country where it does business.
Answer:
How does the treatment of borrowing costs under U.S. GAAP differ from IFRS?
A. U.S. GAAP has no guidance for accounting treatment related to borrowing costs.
B. U.S. GAAP specifically includes foreign exchange gains and losses on foreign
currency borrowings.
C. The definition of borrowing costs under U.S. GAAP is broader in scope than the
definition of interest cost under IAS 23.
D. U.S. GAAP does not allow netting of interest income against interest cost.
Answer:
According to the Norwalk Agreement, the FASB will monitor:
A. all IASB projects.
B. IASB projects according to their level of interest in the topic.
C. no IASB projects, since the IASB is capable of self-monitoring.
D. only those projects dealing with internationally complex issues.
Answer:
Historical cost is the primary basis for asset valuation under U.S. GAAP. Why is
historical cost NOT as important in the accounting systems of Latin America as in the
U.S.?
A. Historical costs are too difficult to calculate in the currencies used in Central and
South America.
B. The countries of Latin America have experienced very high rates of inflation, which
would make historical costs meaningless to readers of financial statements.
C. There is very little foreign direct investment in the countries of Latin America, so
few assets need to be accounted for.
D. In Latin America, asset prices are very stable, making historical costs equal to
replacement costs, so it doesn’t matter which valuation basis is used.
Answer:
Why do Mexican accounting standards require all nonmonetary assets and liabilities to
be restated in terms of purchasing power of the Mexican currency?
A. To properly reflect exchange rate gains and losses in the financial statement
B. In order to reflect the historical cost of the assets and financing associated with these
assets
C. To reflect the high rates of inflation that Mexico has experienced
D. Because historical costs overstate the value of the assets and corresponding claims
on resources
Answer:
Which of the following actions could a company use to hedge balance sheet exposure?
A. Forward contract on foreign currency
B. Foreign currency option
C. Foreign currency borrowing
D. All of the above may be used to hedge balance sheet exposure.
Answer:
Why does the IASB believe that a principles-based approach to standard setting is
superior to a rules-based approach?
A. Detailed guidance or rules encourage accountants to look for ways around the rules
rather than trying to provide useful information.
B. Principles-based standard setting is less costly to undertake than rules-based
standard formulation.
C. It is desirable to have all corporations in all countries using the same accounting
practice.
D. A conceptual framework for standard setting has demonstrated to encourage the
greatest economic development.
Answer:
Which of the following items is considered to be the most significant impediment to
accounting convergence?
A. Nationalism
B. Lack of accounting knowledge
C. Language differences
D. High cost of convergence
Answer:
According to Sir Bryan Carsberg, former IASC secretary-general, what is the most
significant cost of accounting diversity?
A. The time expended by accountants to create multiple sets of financial statements
conforming to different national standards
B. The cost of the IASB to regulate compliance with many national accounting
standards
C. It may limit the effectiveness of the international capital markets
D. The resources used by countries in legislating different sets of accounting standards
Answer:
When the parent company of a foreign subsidiary believes that all of its investment in
the subsidiary is exposed to foreign exchange risk, what method of translation should
be used in consolidating the financial statements?
A. Current rate method
B. Current/noncurrent method
C. Monetary/nonmonetary method
D. Temporal method
Answer:
The population of Japan is about 1/3 the population of the United States. There are
approximately 250,000 CPAs in the U.S. What is the approximate number of CPAs in
Japan?
A. 250,000
B. 100,000
C. 85,000
D. 15,000
Answer:
What U.S. term was equivalent to “inventories” as it was used in financial statements of
companies located in the United Kingdom, prior to adoption of IFRS in 2005?
A. Operating assets
B. Consumables
C. Stocks
D. Merchandise
Answer:
How does the cultural value of collectivism explain the status of auditors in Japanese
society?
A. Collectivism places great importance on individual responsibility, giving auditors a
high status in Japanese society.
B. Since outsiders are not trusted in the Japanese culture, independent auditors in Japan
do not enjoy the status of American auditors.
C. As individual achievement is a hallmark of collectivism, auditors are commonly
found at the top of Japanese corporations.
D. Collectivism values the ability of individuals to collect resources for themselves, so
auditors who achieve distinction in their profession are highly regarded.
Answer:
Which of the following is an example of a “greenfield” investment?
A. Nike contracts with a footwear company in China to make athletic shoes.
B. A Chinese oil company buys a U.S. oil company.
C. Toyota, a Japanese automaker, builds an assembly plant in Ohio.
D. Daimler, a German automaker, merges with Chrysler, a U.S. automaker.
Answer:
Which of the following is most likely to affect an analyst’s ability to make meaningful
comparisons of financial statement ratios for companies in different countries?
A. Differences in currency
B. Language differences
C. Diversity of accounting principles and practices
D. Mathematical degrees of magnitude
Answer:
Keiretsu controls more than one-fourth (1/4) of the assets in Japan. What cultural value
is reflected in this business structure?
A. Professionalism
B. Optimism
C. Collectivism
D. Conservatism
Answer:
The five most multinational U.S. companies in 2008 were Liberty Global Inc., AES
Corporation, ExxonMobil, Schlumberger, and:
A. General Electric.
B. Kraft Foods.
C. International House of Pancakes.
D. Starbucks.
Answer:
What is Germany’s position with respect to accounting standards harmonization?
A. IFRS should be used as long as they conform to directives set by the European
Union.
B. German GAAP is not influenced by IFRS.
C. Accounting standard harmonization is of little interest to German accounting
regulators.
D. Germany has no mechanism for ensuring that accounting standards are consistent
with IFRS.
Answer:
How do multinational corporations combine operations?
A. The acquired firm is dissolved and is merged into the acquiring company.
B. One company acquires a majority of shares of another company, but both entities
continue to exist.
C. Two or more entities dissolve their legal status and merge to create a new
corporation.
D. All of the above.
Answer:
Until recently, regulation of accounting practice in the United Kingdom had
traditionally been left to:
A. the Parliament.
B. the accounting profession.
C. the securities exchange commission.
D. None of the above
Answer:
Under FASB ASC 830, Foreign Currency Matters, when the temporal method is used,
how are translation adjustments treated in the consolidated financial statements?
A. As gains or losses on the current period consolidated income statement
B. As prior period adjustments to retained earnings of the parent
C. As part of other comprehensive income on the consolidated balance sheet
D. None of the above because the temporal method is not allowed under FASB ASC
830.
Answer:
According to the World Trade Organization, what was the size of international trade in
2011?
A. $7,000,000,000 (7 billion dollars)
B. $70,000,000,000 (70 billion dollars)
C. $37,000,000,000 (37 billion dollars)
D. $18,000,000,000,000 (18 trillion dollars)
Answer:
Why would a company want its stock cross-listed on the stock exchanges of several
countries?
A. To make financial reporting less burdensome for its accounting firm
B. In order to use International Financial Reporting Standards
C. To gain access to more financial resources than are available in its home country
D. All of the above
Answer:
A translation adjustment may be necessary when:
A. notes to financial statements are converted from one language to another.
B. foreign currency financial statements are converted to another currency.
C. purchasing goods from a domestic company.
D. hedging foreign currency.
Answer:
Which of the following is true of Tokyo agreement of August 2007?
A. It is a jointly announced agreement between the Accounting Standards Board of
Japan (ASBJ) and Financial Accounting Standards Board (FASB).
B. It is an agreement announced to eliminate the cross-corporate ownership of
companies in Japan.
C. It is a jointly announced agreement between Japanese Institute of Certified Public
Accountants (JICPA) and Japan’s Ministry of Finance (MoF).
D. It was announced to accelerate the process of convergence between Japanese GAAP
and IFRS.
Answer:
What is the most important federal agency regulating disclosure by publicly traded
companies in Mexico?
A. Mexican Institute of Public Accountants (MIPA)
B. National Banking and Securities Commission (NBSC)
C. Bolsa Mexicana de Valores (BMV)
D. National Executive Committee (NEC)
Answer:
Profit indicators that might be considered in applying the comparable profits method
include the ratio of:
A. operating income to operating assets.
B. debt to equity.
C. receivables to net sales.
D. operating expenses to net sales.
Answer:
Unlike IFRS, under Japanese GAAP, inventories may be valued at:
A. cost.
B. market.
C. lower of cost or net realizable value.
D. lower of cost or market.
Answer:
What is the U.S. policy concerning taxing income of a foreign branch of a U.S.
corporation?
A. Tax is imposed on the foreign branch income in the year it is earned.
B. Tax is paid on the foreign branch’s income when the profits are returned to the U.S.
parent as dividends.
C. The government of the U.S. does not tax foreign source income.
D. Tax credits for losses incurred by the foreign branch are recognized by the parent
currently, but taxes on profits are deferred until dividends are paid.
Answer:
Under U.S. GAAP, what method of translating foreign currency financial statements
must be used for subsidiaries in highly inflationary economies?
A. Current rate method
B. Current/noncurrent method
C. Temporal method
D. Monetary/nonmonetary method
Answer: