Under IFRS 2, with respect to choice-of-settlement share-based payments, if the
supplier chooses the cash settlement, the entity is deemed to have issued a compound
financial instrument consisting of debt and equity. When cash is received, how does the
supplier applies it?
A. Only against the equity portion
B. Apportioned between debt and equity based on relative fair market value of each
component
C. Only against current year liabilities
D. Only against the debt portion
Answer:
Under both IFRS and U.S. GAAP, in an equity-settled share-based payment transaction,
how are such payments to non-employees measured?
A. At the cost of the goods or services received.
B. Both standards are silent as to the treatment of payments to non-employees.
C. Always the fair value of the equity instrument.
D. At the fair value of goods or services received, if a reliable determination is
availableotherwise, the fair value of the equity instrument.
Answer:
Which of the following is the purpose of China’s “Accounting System for Business
Enterprises” issued in 2001 to supersede its “Basic Standard of Accounting for Business
Enterprises?”
A. Increase harmonization of accounting standards.
B. Improve comparability of accounting statements.
C. Make financial reporting distinct from taxation.
D. All of the above
Answer:
What kinds of temporary differences related to income taxes can arise under IFRS that
don’t occur under U.S. GAAP?
A. Book and tax differences related to the amortization of property, plant, and
equipment for book purposes and cost method for tax purposes.
B. Book and tax differences related to the calculation of impairments for book
purposes with adjustment for tax purposes.
C. Book and tax differences related to the revaluation of property, plant, and equipment
for book purposes and cost method for tax purposes.
D. Book and tax differences related to the calculation of contingent liability for book
purposes with no like adjustment for tax purposes.
Answer:
Why is auditing a multinational corporation potentially more difficult than auditing an
entity that has only domestic operations?
A. Language differences
B. Cultural differences
C. Multiple sets of accounting standards
D. All of the above
Answer:
What is an audit committee?
A. It is a group of audit firms that develop national or international standards for
auditing practice.
B. It is a subset of a corporate board of directors with oversight of the auditing
function.
C. It is the team of external auditors (i.e. CPAs) that conducts audit testing and
prepares the audit report.
D. It is a management group responsible for negotiating the audit engagement with a
public accounting firm.
Answer:
Under U.S. GAAP, if an entity issues 4% preferred stock that gives shareholders the
right to redeem the shares if the prevailing interest rates on 5-year certificates of deposit
exceed 4%, how should this stock be accounted for on the books of the entity?
A. Initially as equity and then reclassified as a liability when the triggering event
occurs
B. As a liability since the chances are more likely than not that the triggering event will
occur
C. As equity or a liability at the option of the entity
D. As a permanent part of equity, to be debited as shares are redeemed
Answer:
According to OECD principles, what group is ultimately responsible for governing a
multinational organization?
A. Regulatory agencies in the host country
B. Regulatory agencies in the home country
C. Board of directors
D. Common shareholders
Answer:
What is foreign exchange risk exposure?
A. The possibility of a loss because of changes in the value of a foreign currency
B. Losses caused by paying for purchased goods in a foreign currency
C. Losses caused by receiving payment in a foreign currency for goods sold
D. All of the above
Answer:
Which of the following is a major limitation of using the internal rate of return as a tool
in capital budgeting?
A. Ignores the time value of money
B. Does not consider cash flows
C. Does not use accounting numbers
D. Assumes unrealistic reinvestment rate
Answer:
The factor used to convert from one country’s currency to another country’s currency is
called the:
A. interest rate.
B. cost of capital.
C. exchange rate.
D. strike price.
Answer:
The meaning of corporate social reporting (CSR) is derived from the notion of:
A. governmental societal responsibility.
B. organizational societal responsibility.
C. Maslow’s hierarchy of needs.
D. the Sarbanes-Oxley Act of 2002.
Answer:
Why is depreciation added to net income to determine cash flow from operations?
A. To compensate for financial risk.
B. Depreciation is an expense but not a cash outflow.
C. It is standard procedure when capital budgeting for a multinational corporation.
D. Net income is understated due to excessive depreciation.
Answer:
What does “transparency” mean in accounting?
A. An emphasis on confidentiality
B. Restricted disclosure of accounting information
C. Flexibility in the application of accounting standards
D. Openness of accounting information
Answer:
Under U.S. tax law, what is the relationship between foreign tax credits and the
different categories of foreign source income?
A. FTC from one category can offset taxes owed on other categories.
B. Excess FTC from one category can be carried forward to offset future U.S. taxes
payable on another category.
C. Excess FTC from one category can be carried back to offset U.S. taxes paid on
another category in the prior year.
D. None of the above
Answer:
The accounting standards in code law countries tend to be:
A. very detailed.
B. formulated by organizations such as the FASB.
C. stated generally without much guidance on accounting procedures.
D. very conservative.
Answer:
Which of the following is true of responsibility accounting?
A. It suggests that foreign subsidiaries should be held responsible for profitability of
the parent companies.
B. Responsibility accounting suggests that local manager should be held responsible
for the translation adjustment.
C. It suggests that costs, revenues, assets, and liabilities should be traced to the
individual manager who is responsible for them.
D. It suggests that managers should be held accountable for items that are both
controllable and uncontrollable.
Answer:
Under both the temporal method and the current rate method, what exchange rate
should be used to translate a foreign subsidiary’s additional paid-in capital into parent
company currency?
A. Closing rate
B. Current rate
C. Average rate
D. Historical rate
Answer:
IAS 18, Revenue, covers which types of revenues?
A. Sale of goods
B. Rendering of services
C. Interest, royalties, and dividends
D. All of the above
Answer:
What term is used to refer to a cultural aversion to ambiguous situations?
A. Uncertainty avoidance
B. Masculinity
C. Power distance
D. Individualism
Answer:
Northland Corporation recorded £1,000,000 in Accounts Receivable for sales to
customers in the United Kingdom and recorded Accounts Payable of 2,000,000 Yuan
for product purchased from China. If Northland recorded a foreign currency exchange
loss on its receivables and a foreign currency gain on its payables, what must have
happened to each currency?
A. Yuan appreciated, Pound depreciated
B. Yuan depreciated, Pound appreciated
C. Yuan appreciated, Pound appreciated
D. Yuan depreciated, Pound depreciated
Answer:
Why is litigation against external auditors, which is very common in the United States,
virtually unknown in Japan?
A. Japanese auditors rarely make mistakes in their professional work.
B. Such litigation is inconsistent with Japanese values of interpersonal harmony.
C. Japan lacks a sophisticated court system for handling complex cases involving
accounting matters.
D. External auditors are not responsible for the quality of work performed for a
corporate client.
Answer:
How is the fair value of a foreign currency option calculated?
A. By using the Box-Jenkins technique
B. Using the modified Black-Scholes pricing model
C. Through an arms-length transaction
D. Using quotes given daily in the Wall Street Journal
Answer:
Mega Corporation acquired 65% of the voting shares of Forko Ltd for €10 billion and
used the purchase method of accounting for the merger. Mega Corporation’s interest in
Forko Ltd. had a restated value of €950 million. How should the difference be
accounted for by Mega Corporation?
A. As Gain from Acquisition on the current period income statement
B. As Goodwill on the consolidated balance sheet
C. As a Loss from Merger on the current period income statement
D. As Additional Paid-in Capital on the consolidated balance sheet
Answer:
The methods allowed by the IFRS for valuing property, plant, and equipment are:
A. historic cost and general purchasing power.
B. historic cost and fair value.
C. fair value and general purchasing power.
D. fair value and inflation-adjustment.
Answer:
The Squeaky Division of Household Products Corporation showed a net loss of
£5,000,000 last year, but Squeaky’s manager received a bonus for outstanding
performance. Why would Household Products’ management control system
appropriately allow for this apparent inconsistency?
A. Economic factors outside the manager’s control caused the loss.
B. Household Products’ management control system is ineffective.
C. The bonus represents a payoff to Squeaky’s manager to keep her quiet about the
loss.
D. The loss was due to controllable factors.
Answer:
ESG is an acronym for:
A. Environmentally Specific Gases.
B. Environmental, Social, and Governance.
C. European Societal Goals.
D. Ecologically Safe Groundwater.
Answer:
What is the time frame in which taxpayers must produce documentation to the IRS, in
which it justifies the transfer pricing method that it has selected as being the most
reliable measure of arm’s-length price?
A. Within 90 days
B. Within 60 days
C. Immediately upon request
D. Within 30 days
Answer:
Which of the following is a true statement about the use of the payback period
technique in capital budgeting?
A. It is simple to use and understand.
B. It considers the time value of money.
C. It is not possible to appraise risk with this technique.
D. It is mainly used to measure profitability of a project.
Answer:
According to Gray’s framework for accounting system development, the counterpart to
the accounting value of ‘secrecy” is:
A. professionalism.
B. transparency.
C. optimism.
D. flexibility.
Answer:
Which of the following statements is true of the treatment of actuarial gains and losses
under IFRS and U.S. GAAP?
A. IFRS requires the disclosure of actuarial gains and losses in the notes to financial
statements.
B. IFRS requires immediate recognition of actuarial gains and losses in net income.
C. U.S. GAAP allows a choice between immediate recognition in other comprehensive
income or in net income.
D. U.S. GAAP requires the actuarial gains and losses to be recognized immediately
through other comprehensive income.
Answer:
How can the conflict between cost minimization and performance evaluation be
overcome in a decentralized organization?
A. Dual transfer pricing systems
B. Market-based transfer pricing systems
C. Cost-based transfer pricing systems
D. Negotiated transfer pricing systems
Answer:
How is the payback period used in capital budgeting?
A. As a measure of a project’s risk
B. To determine the amount of funds that will be required in the future
C. To measure the relationship between the project’s return and the company’s cost of
capital
D. None of the above
Answer: