Under FASB ASC 830, Foreign Currency Matters, what group is responsible for
determining the functional currency of a foreign subsidiary for many cases?
A. Financial Accounting Standards Board
B. International Accounting Standards Board
C. Securities and Exchange Commission
D. Parent company management
Answer:
Why is the validity and reliability of financial disclosures of limited importance in the
People’s Republic of China (PRC)?
A. Chinese investors look for long-term stock price gains, which are not based on
fundamental company data.
B. The government owns all of the corporate stock traded in the PRC.
C. Most of the stock purchased in the PRC is held for only a short period of time.
D. Most of the stock is rated by the government of the PRC in terms of its quality.
Answer:
Jane, a citizen of Country X, received a corporate dividend in the amount of £10,000
from a company in the U.K. Country X taxed Jane’s dividend as ordinary income.
Country X is using what kind of approach toward foreign source income?
A. Territorial approach
B. Worldwide approach
C. Legalistic approach
D. None of the above
Answer:
The debt ratio of Dynasty Industries, a Japanese corporation, is 62%. Why might this be
difficult to compare to the debt ratio of a U.S. manufacturing corporation?
A. U.S. companies generally have debt ratios greater than 62%.
B. U.S. companies generally have debt ratios less than 62%.
C. Japanese financing preferences may be different from American preferences.
D. Japanese companies report assets and liabilities in yen, whereas U.S. companies
report in dollars.
Answer:
If a company is unable to use all its foreign tax credit in a tax year, what happens to the
excess?
A. It is carried forward until it is used up.
B. It is carried back 3 years and forward 5 years.
C. It is carried back 1 year and forward 10 years.
D. It is lost forever.
Answer:
The following information was taken from the fixed asset records of Bosco Ltd. as of
December 31, 2010:
What is the amount of impairment loss under U.S. GAAP?
A. €37,000
B. €18,000
C. €15,000
D. €25,000
Answer:
Which of the following groups is responsible for developing international auditing
standards?
A. International Accounting Standards Board (IASB)
B. International Auditing and Assurance Standards Board (IAASB)
C. International Organization of Securities Commissions (IOSCO)
D. Organization for Economic Cooperation and Development (OECD)
Answer:
In its sustainability report for 2009, which major company states that it plans to cut
carbon emissions of its airline by an additional 20% by 2020?
A. Southwest Airlines
B. Federal Express
C. Jet Blue
D. UPS (United Parcel Service Inc.)
Answer:
What share of the world’s gross domestic product (GDP) is generated by the 100 largest
multinational companies?
A. 4%
B. 12%
C. 50%
D. 75%
Answer:
What percentage of world trade is represented by manufactured products?
A. 64.6%
B. 22.5%
C. 8.5%
D. 75.5%
Answer:
Why is investing in foreign companies an effective way to diversify an individual’s
investment portfolio?
A. Foreign economies are stronger than the U.S. economy.
B. Foreign stocks are less risky than the stocks of U.S. corporations.
C. Stock returns of companies in foreign companies are highly correlated with stock
returns of U.S. companies.
D. Returns on foreign company stocks do not always change in the same direction as
returns on U.S. stocks.
Answer:
What term is used to describe a unit of a multinational corporation that takes a leading
role in a particular area?
A. Implementer
B. Global innovator
C. Local innovator
D. Integrated player
Answer:
Why is the multinational capital budgeting process more complex than capital
budgeting in a domestic environment?
A. Cash flows must be predicted.
B. An appropriate discount rate must be selected.
C. Involvement of additional risks affecting future cash flows.
D. The payback period is shorter.
Answer:
What is a withholding tax?
A. Income tax paid on corporate earnings.
B. An amount subtracted from a dividend payout and remitted to the government.
C. This is an income tax corporations pay to local governments in addition to the
national income tax.
D. Taxes that lower the effective tax rate in a country.
Answer:
Controlled foreign corporations (CFC) will not be taxed on their foreign income
currently if:
A. the foreign tax rate is less than 90% of the U.S. corporate income tax rate.
B. Subpart F income is less than 70% of the CFC’s total income.
C. Subpart F income is less than 5% of the CFC’s total income.
D. None of the above
Answer:
What term is used for an option with a positive intrinsic value?
A. Put option
B. Over the counter
C. In the money
D. Call option
Answer:
The Japanese economy is dominated by “keiretsu.” What are these?
A. Warlords that control Japanese wealth
B. Local governmental entities
C. Large conglomerates
D. Joint ventures with foreign investors
Answer:
Relative to accounting standards in countries such as Germany, whose accounting laws
are only 47 pages long, accounting practice in the U.S. is often described as being
subject to:
A. standards overload.
B. standards minimization.
C. the optimal amount of accounting regulation.
D. ideal accounting standards.
Answer:
If a company chooses the revaluation model permitted in IAS 16 for fixed asset
measurement:
A. annual revaluations must be performed on each class of assets.
B. it must update the valuation so that the balance sheet represents fair value on the
balance sheet date.
C. appraisals must be performed by an official of the IASB.
D. the depreciated replacement cost must be used as the fair value of the fixed asset.
Answer:
What causes double taxation?
A. A taxpayer being subject to tax laws in multiple jurisdictions
B. Profits increasing excessively from year to year
C. Penalties imposed by a taxing authority for non-payment of taxes
D. None of the above
Answer:
What should be the basis for choosing depreciation methods for fixed assets under IAS
16 (Property, Plant, and Equipment)?
A. Tax minimization
B. Profit maximization
C. Useful life of the fixed asset
D. Pattern of economic benefits to be derived from the asset
Answer:
According to IFRS 3, how should companies account for negative goodwill arising
from business combinations?
A. It should be capitalized and amortized over a period of no more than 40 years.
B. It should be treated as a loss on the consolidated income statement.
C. It should be recognized immediately as a gain in the income statement.
D. There is no rule for negative goodwill, because there is no such thing.
Answer:
What kind of exposure exists for recognized foreign currency assets and liabilities?
A. Fair value exposure
B. Cash flow exposure
C. Both fair value exposure and cash flow exposure
D. Neither fair value exposure nor cash flow exposure
Answer:
Which of the following is found in a Mexican income statement in the “Comprehensive
Financing Result” section?
A. Non-controlling interest net income
B. Purchasing power gain or loss during inflationary periods
C. Income taxes
D. Equity in income of associates
Answer:
What issue of reporting effects of changing prices is addressed by IAS 29, issued by the
International Accounting Standards Board in 1989?
A. Choice between current replacement cost and general purchasing power method
B. Making inflation-adjusted reporting optional or required
C. Specifying the European Central Bank as the official source of inflation rates in the
European Union
D. Mandating inflation adjustment for primary financial statements of companies in
hyperinflationary economies
Answer:
Which of the following tests is performed to determine if an operating segment should
be reported separately?
A. Liability test
B. Asset test
C. Impairment test
D. Expense test
Answer:
Foreign companies that are listed on the New York Stock Exchange (NYSE) and
following their domestic GAAP must report their income in terms of:
A. the International Accounting Standards.
B. the GAAP of their home country.
C. the GAAP of the United States.
D. All of the above
Answer:
Which of the following statements is true about the Euro?
A. It is the currency used by all countries in the European Union.
B. It is pegged to the U.S. dollar.
C. It is the currency required to be used in financial reporting under international
accounting standards.
D. None of the statements above is true.
Answer:
Under the citizenship approach of tax jurisdiction, if Company A, incorporated in
Country X, was based in Country Y and earned dividends in Country Z, the dividends
would be ultimately taxed in which country?
A. Country Z
B. Country Y
C. Country X
D. None of the above, based on tax neutrality
Answer:
The IASB’s Framework for Preparation and Presentation of Financial Statements (1989)
implies that the most important group of users is:
A. government.
B. general public.
C. creditors.
D. investors.
Answer:
Which cost will be minimized by setting a low transfer price?
A. Withholding taxes on a downstream transfer
B. Import duties
C. Currency devaluation of foreign cash flows
D. All of the above
Answer:
The IASB is organized under an independent entity called:
A. the SEC.
B. the AFL.
C. the IFRSF.
D. INTERPOL.
Answer:
Under the IASB’s exposure draft, Income Tax, how would the term ‘substantively
enacted”, as it applies to tax laws, be determined?
A. When the affected jurisdiction has issued final regulations with respect to a tax law
B. When any future steps in the enactment process can’t change the outcome
C. When one part of a bicameral legislature has passed a tax bill
D. All of the above
Answer: