Chapter 12 – Multinational Accounting: Issues in Financial Reporting and Translation of Foreign Entity Statements
CHAPTER 12
Q12-1 Interest is increasing because of the expected benefits of adopting a single set
1. Continued expansion of capital markets across national borders.
2. More rapid development of stable, liquid capital markets.
3. Increased economic growth.
4. Improve ability of investors to evaluate opportunities across national borders.
5. Improve the efficient use of global capital.
6. Reduce reporting costs for corporations that wish to access capital in markets
7. Increase confidence of financial statement users in the quality of financial reporting.
Q12-2 The IASB is an independent privately funded accounting standards-setting body.
The mission of the IASB is to develop a single set of high-quality, understandable, and
Q12-3 The IASB solicits input from the public when evaluating potential standards and
Q12-4 IFRS are already mandated or permitted in over 100 countries around the world.
Beginning with 2005, the European Union mandated the use of IFRS for companies
Q12-5 The attitude toward the possible use of IFRS in the United States is cautiously
Copyright © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized
for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted
on a website in whole or part.
business.
Q12-19 If an investment in a foreign subsidiary is not consolidated, it is reported as a
long-term investment on the U.S. company’s financial statements, usually under the
Q12-20 The issue with intercompany transactions is with regard to the amount of
unrealized profit. The unrealized profit determined at the time of the initial intercompany
transaction is a function of the currency exchange rate at that time. As the rate changes,
C12-1 Comparison of US GAAP and IFRS
C12-2 Structure of the IASB
The International Accounting Standards Committee (IASC) Foundation is the parent
C12-3 IASB Deliberations
C12-4 Determining a Functional Currency
The choice of a functional currency is based on the currency used for six criteria
provided in ASC 830, as follows: (1) cash flows, (2) sales prices, (3) sales markets, (4)
