What is a “greenfield” investment?
A. Farm land held for speculation
B. Foreign direct investment whereby a new facility is constructed abroad
C. Purchasing an existing facility as a foreign direct investment
D. A foreign investment that has been approved by the Environmental Protection
Agency
Answer:
Which of the following is done when accounting for a cash flow hedge, but is not done
when accounting for a fair value hedge?
A. The hedged asset or liability is adjusted to fair value.
B. Foreign exchange gains or losses on the hedged asset or liability are recorded in net
income.
C. Increases or decreases in a derivative’s fair value are recorded in accumulated other
comprehensive income.
D. Gains or losses resulting from adjusting the fair value of a derivative are recorded in
net income.
Answer:
Which of the following represents a difference in the classification of current liabilities
between IFRS and U.S. GAAP?
A. Refinanced short-term debt
B. Amounts payable on demand due to violation of debt covenants
C. Bank overdrafts
D. All of the above
Answer:
SSM Corporation, a multinational healthcare system, measures the number of minutes
between a patient’s arrival at the emergency room and the time he/she is seen by a
physician. This measure focuses on what aspect of the balanced scorecard?
A. Financial perspective
B. Customer perspective
C. Internal business processes perspective
D. Innovation and learning perspective
Answer:
For a business combination in which the acquirer achieves control without acquiring all
the equity of the acquiree, the noncontrolling equity interest is measured:
A. either at fair value or at noncontrolling interests’ proportionate share of the
acquiree’s net identifiable assets.
B. either at historic cost or at noncontrolling interests’ proportionate share of the
acquiree’s net identifiable assets.
C. only at fair value.
D. either at historic cost or at controlling interests’ proportionate share of the acquiree’s
net identifiable assets.
Answer:
By what title are professional accountants in Mexico known?
A. Certified Public Accountant (CPA)
B. Chartered Accountant (CA)
C. Contador Publico Certificado (CPC)
D. Mexican Certified Public Accountant (MCPA)
Answer:
The primary difference between IAS 37, and U.S. GAAP concerning the treatment of
contingent liabilities pertains to:
A. definition of terms.
B. measurement.
C. classification on the balance sheet.
D. disclosure of relevant information.
Answer:
What is a ‘strike price?”
A. The exchange rate that is used to buy a foreign currency today
B. The price that will be paid for goods in a forward contract
C. The exchange rate that will be used if a foreign currency option is executed
D. The difference between the wholesale rate and the retail rate for foreign currency
exchange
Answer:
Under IAS 32, which of the following is a financial liability?
A. A payable
B. A bank loan
C. An intercompany loan payable
D. All of the above
Answer:
The Internal Revenue Service determined that Covington Ltd. should have been using a
transfer price of $400 for the purchase of goods from its U.S. subsidiary but had set the
price at $50. What is the rate of penalty that the IRS can impose on the taxpayer?
A. 10% of the amount of taxes underpaid
B. 20% of the amount of taxes underpaid
C. 40% of the amount of taxes underpaid
D. 100% of the amount of taxes underpaid
Answer:
What does it mean to say that the inflation rate last year was 5%?
A. All prices are 5% less at the end of the year than they were at the beginning of the
year.
B. The price of specific products increased 5% between the beginning and the end of
the year.
C. On average, a typical basket of goods costs 5% more at the end of the year than it
did at the beginning of the year.
D. The general purchasing power of the dollar has increased 5% between the beginning
of the year and the end of the year.
Answer:
What is true about both IFRS and U.S. GAAP with respect to service contracts?
A. IFRS and U.S. GAAP both allow the use of the percentage-of-completion method.
B. Neither IFRS, nor U.S. GAAP allows the use of the percentage-of-completion
method.
C. IFRS allows the use of the percentage-of-completion method while U.S. GAAP
does not.
D. U.S. GAAP allows the use of the percentage-of-completion method while IFRS
does not.
Answer:
Which of the following bases for fixed asset valuation was being used by Mexico until
2008?
A. Historical cost
B. Historical cost later restated in terms of GPP
C. Historical replacement cost
D. Net realizable value
Answer:
Which is a goal of the Chicago Climate Exchange (CCX)?
A. To help inform the public debate on managing the risk of climate change
B. To facilitate capacity-building in both public and private sectors to facilitate GHG
migration
C. To build the skills and institutions needed to cost-effectively manage GHGs
D. All of the above
Answer:
How do differences in the effective corporate tax rates between countries affect capital
investment decisions?
A. Taxes have a negative effect on cash flows from the investment.
B. Taxes determine the rate used in calculating the discounted cash flows.
C. Taxes affect the amount of depreciation that will be recorded on the investment.
D. All of the above
Answer:
The Fourth Directive of the European Commission:
A. aims at harmonizing the educational and training prerequisites necessary to become
a statutory auditor.
B. requires that the auditor’s report include whether the financial statements present a
“true and fair view.”
C. mandates for the new members of the auditing profession to hold a university
degree in accountancy.
D. requires that the auditor of the company to be the officer or employee of the
company being audited.
Answer:
Why might a developing country offer a tax holiday?
A. To encourage job creation
B. To encourage foreign investment in the country
C. To stimulate foreign trade
D. All of the above
Answer:
Under IAS 18, which of the following is NOT a condition that must be met in order for
revenue from the sale of goods to be recognized?
A. The significant risks and rewards of ownership of the goods have been transferred to
the buyer.
B. There must be a binding, written contract between the seller and the buyer.
C. The amount of revenue can be measured reliably.
D. Neither continued managerial involvement normally associated with ownership nor
effective control of the goods is retained.
Answer:
On November 1, 20×1 Zamfir Company, a U.S. corporation, purchased minerals from a
Russian company for 2,000,000 rubles, payable in 3 months. The relevant exchange
rates between the U.S. and Russian currencies are given:
The company’s incremental borrowing rate provides a discount rate of 0.975 for three
months.
Assume that on November 1, 20×1 Zamfir Company enters a forward contract to buy
2,000,000 rubles on February 1, 20×2. What is the fair value of the forward contract on
December 31, 20×1?
A. $8,000
B. $7,800
C. $22,000
D. $8,200
Answer:
What is goal congruence?
A. Making the goals of individual managers the same as corporate goals
B. Equating managerial goals to corporate goals
C. Aligning managerial goals with corporate goals
D. Giving managers complete autonomy to make decisions
Answer:
According to the research of Christopher Nobes, the most relevant factor in determining
the purpose of financial reporting is:
A. the financing system of the country.
B. religious differences across countries.
C. the population of the country.
D. the strength of the country’s accounting profession.
Answer:
Which country is NOT a member of the Asia-Pacific Partnership on Clean
Development and Climate?
A. Japan
B. New Zealand
C. India
D. Korea
Answer:
Which is NOT one of the basic steps in financial statement analysis?
A. Prospective analysis
B. Accounting analysis
C. Translation analysis
D. Financial analysis
Answer:
What is “Subpart F” income?
A. All foreign source income
B. Foreign income that is not taxable by foreign jurisdictions
C. Income that is easily moved to low-tax jurisdiction
D. Foreign source income that is exempt from U.S. taxation
Answer:
What is one major difference between IFRS and U.S. GAAP relative to discontinued
operations?
A. U.S. GAAP requires that the after-tax gain or loss from operations and the after-tax
gain or loss on asset disposal be shown as a combined item.
B. U.S. GAAP requires both pre-tax and after-tax profit and loss on discontinued
operations to be reported on the income statement.
C. The definition of the type of operation that can be classified as discontinued is
narrower under U.S. GAAP.
D. IFRS requires no separate disclosure for discontinued operations.
Answer:
Which of the following is true about advance pricing agreements?
A. They are only granted for intercompany transactions between a U.S. parent and a
foreign subsidiary.
B. They are only granted for intercompany transactions between a foreign parent and a
U.S. corporation.
C. In 2003, the IRS approved several thousand advance pricing agreements for U.S.
taxpayers.
D. None of the above is true.
Answer:
In addition to having very low effective tax rates, which of the following is also a
characteristic of tax havens?
A. Lack of transparency in financial reporting
B. Lack of effective exchange of information
C. Absence of substantial activities requirement
D. All of the above
Answer:
Because some countries have a lower withholding tax on interest than they do for
dividends, multinational corporations may finance foreign operations with debt rather
than equity. What additional reason may an MNC have for using this investment
strategy?
A. Interest is generally a deductible expense, whereas dividends paid are not.
B. Dividends require a cash outflow but interest does not.
C. Cash flows from dividends must be discounted using the cost of capital, which is
not the case for interest.
D. All of the above
Answer:
Which of the following is potentially a problem associated with historical cost-based
financial statements in periods of inflation?
A. Asset understatement
B. Overpayment of income taxes
C. Overstated income
D. All of the above are potential problems
Answer:
Aco Ltd mined diamonds at a cost of FC 1,000,000 and sold them to Beako for FC
2,500,000. Beako distributed the diamonds to its customers and received FC 4,000,000.
If the national VAT is 20%, how much tax did Beako pay?
A. FC 200,000
B. FC 500,000
C. FC 300,000
D. FC 800,000
Answer:
What is the primary source of finance for German companies?
A. Issuance of stock
B. Corporate bonds
C. Bank loans
D. Government grants
Answer:
Under U.S. tax law, what is a “resident?”
A. A person living in the United States for 183 days or more in a year
B. A person holding a “green card” from the U.S. Immigration and Naturalization
Service
C. A corporation organized in the United States
D. All of the above
Answer:
Which capital budgeting technique recognizes the time value of money?
A. Payback period
B. Internal rate of return
C. Book rate of return
D. Return on investment
Answer: