Accounting for Multinational Corporations
Chapter Exam Questions
Course Introduction
Accounting for Multinational Corporations examines the unique financial reporting and accounting challenges faced by organizations that operate across international borders. This course explores topics such as foreign currency translation, international financial statement analysis, global tax regulations, transfer pricing, and the harmonization of accounting standards through systems like IFRS and US GAAP. Students will analyze how multinational corporations manage financial risks, comply with diverse regulatory frameworks, and communicate performance to stakeholders in different countries. Through real-world case studies, the course equips learners to understand and apply accounting principles in a globalized business environment.
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International Accounting and Multinational Enterprises 6th Edition by Lee H. Radebaugh
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Chapter 1: International Accounting and International Business
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Q1) The International Accounting Standards Board, an international organization dedicated to the diversity of accounting standards worldwide.
A)True
B)False
Answer: False
Q2) The wider audience of users of financial information (employees, trade unions, consumers, etc.)
A) is relatively unimportant in any country due to their lack of political and financial power.
B) want the same information as do providers of capital.
C) tend to pursue a different set of information due to their nontraditional goals.
D) want information that really doesn't affect corporate behavior and performance.
Answer: C
Q3) One trend in European securities markets is consolidation.
A)True
B)False
Answer: True
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Chapter 2: International Accounting Patterns, Culture and Development
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Q1) Weak uncertainty avoidance as a cultural value implies that
A) people have a preference for a loosely knit social framework in society.
B) people accept a hierarchical order.
C) people strive for power equalization and demand justification for power inequities.
D) people maintain a relaxed atmosphere in which practice counts more than principles and deviance is more easily tolerated.
Answer: D
Q2) The hypothetical classification for financial reporting developed by Christopher Nobes
A) is an inductive approach to classification.
B) is a hierarchical scheme of classification that distinguishes countries according to microeconomic and macroeconomic systems.
C) uses the Price Waterhouse data to group countries.
D) classifies countries according to measurement and disclosure practices.
Answer: B
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Chapter 3: Comparative International Financial Accounting
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Q1) Which of the following accurately reflects Japanese accounting?
A) On the authority and enforcement measures, the Japanese are professional and flexible.
B) The Japanese lean to statutory control and professionalism.
C) The Japanese have been heavily influenced by the Germans but not the Americans.
D) The Ministry of Justice enforces the Companies Act and the Ministry of Finance enforces the Securities and Exchange Act.
Answer: D
Q2) In Japanese accounting,
A) all companies are required to follow the reporting requirements of the Securities and Exchange Law.
B) corporate tax rules are a major source of influence on income measurement practices.
C) the Securities and Exchange Law was developed by the British.
D) reserves are not permitted.
Answer: B
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Chapter 4: Comparative International Financial Accounting
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Q1) India
A) has a government controlled standards body
B) defers accounting standards to the IASC
C) has an independent Accounting Standards Board
D) has expressed a bias to secrecy
Q2) Which of the following is a significant impact on Czech Republic accounting?
A) The accession to the EU.
B) A business economics approach to accounting in the Czech Republic has resulted in widespread use of inflation-adjusted accounting.
C) The effect of tax law is minimal, because tax and book accounting are not allowed to be the same.
D) The Nordic legal tradition has had a strong impact on accounting standards and practices.
Q3) In Russia, accounting regulations are generally created by?
A) Private sector accountants.
B) Security Exchange (SET)
C) Ministry of Finance.
D) IASC.
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Chapter 5: International Financial Statement Analysis
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Q1) Goodwill
A) is amortized in the United States
B) is immediately expensed in Japan
C) is amortized in Britain
D) is subject to an impairment test in Britain.
Q2) Measurement of accounting income is strongly influenced by tax rules in France and Switzerland.
A)True
B)False
Q3) Earnings tend to be more conservative or understated in France and Germany than in the united Kingdom.
A)True
B)False
Q4) The treatment of inventory in Britain differs from that of the United States in that
A) the British approach to inventory measurement is much less restrictive.
B) FIFO is not permitted in Britain.
C) LIFO is not permitted in Britain.
D) in the United States, LIFO is not permitted.
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Chapter 6: International Transparency and Disclosure
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Q1) The value added statement
A) provides information about the contribution of all corporate stakeholders to the success of the business.
B) is used to determine how much value-added tax corporations pay.
C) is generated primarily for potential investors and shareholders.
D) is provided by the majority of European companies, although it is rarely provided by U.S. firms.
Q2) The recent Asian financial crisis
A) might have been prevented with decreased transparency
B) was the result of inconsistent accounting standards
C) could have been prevented with better computer systems
D) might have been prevented with increased transparency
Q3) In cross-border contexts, voluntary disclosures are forthcoming when corporations are competing for finance from investors.
A)True
B)False
Q4) MNEs provide more information in their annual reports than regulations require.
A)True
B)False
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Chapter 7: International Accounting Standards and Global Convergence
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Q1) Following the issuance of several directives in the EU, including the 4th, 7th and 8th, it appears that
A) the EU is ready to issue a series of new accounting regulations.
B) Europeans prefer to have a set of standards that all countries would follow rather than the current level of flexibility.
C) stock exchanges are losing their influence.
D) mutual recognition of each other's accounting standards and practices is becoming the norm.
Q2) Investors have problems with MNE financial statements because
A) worldwide consolidations are not the norm in all countries
B) competitive effects of other investors
C) FASB is the principal source of GAAP
D) governments ask for comparability
Q3) Pressures for harmonization of international accounting as means to achieve comparability are growing.
A)True
B)False
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Chapter 8: International Business Combinations, Goodwill and Intangibles
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Q1) What is the problem of writing off goodwill in service companies
A) leverage will become low
B) the price earnings ratio will not change
C) the stated financial position will not change
D) equity maybe become depleted
Q2) Current international accounting standards permits the amortization of goodwill.
A)True
B)False
Q3) AT&T has a 60 percent equity interest in a joint venture with Marubeni Corporation in Japan to develop and market laptop notebook portable computers, notably the Safari notebook. Would you classify this operation as an
A) implementor.
B) integrated player.
C) local innovator.
D) multidomestic operation.
Q4) Major problems have occurred with joint ventures in Russia, Eastern Europe and China because of the accounting systems.
A)True
B)False
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Chapter 9: International Segment Reporting
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Q1) Which of the following is not a major problem for segment reporting?
A) There are problems with verification of information.
B) There are problems with segment identification.
C) The greater the disaggregation, the more likely the need to allocate common costs, which could distort profits.
D) U.S. firms do not provide much information about their segments.
Q2) According to the British approach to segment disclosures,
A) the Companies Act requires line of business sales but not geographic sales.
B) there is significant guidance as to what is material or what a reportable segment is.
C) the London Stock Exchange requires that firms provide geographic segments by country.
D) SSAP 25 requires geographic segments by source and destination.
Q3) From a competitive standpoint, segment reporting
A) is closer to a level playing field for single industry or single country firms.
B) does not create problems since most countries have similar reporting requirements.
C) creates a real cost of compiling, processing and disseminating information.
D) requires the disclosure of business dealings with major competitors.
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Chapter 10: Foreign Currency Transactions and Translation
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Q1) Assuming the tax treatment for foreign currency transactions, what is the foreign exchange gain or loss on July 15?
A) $1875 loss
B) $1125 loss
C) $ 375 loss
D) $ 750 loss
E) gain or loss is deferred
Q2) If a U.S.-based company has a subsidiary in Germany, and the German subsidiary imports components from Britain, the British pound would most likely be considered (from the standpoint of the German subsidiary)
A) the local currency.
B) a foreign currency.
C) the functional currency.
D) the reporting currency.
Q3) The local currency is
A) the currency in which the parent company prepares its financial statements.
B) any currency other than the parent currency.
C) the currency of the primary economic environment in which the firm operates.
D) the currency of the country where the foreign firm is operating.
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Chapter 11: International Accounting for Price Changes
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Q1) General purchasing power accounting includes constant dollar accounting.
A)True
B)False
Q2) IAS 29 is the current IASB standard on hyperinflationary economies.
A)True
B)False
Q3) Current UK GAAP does not require current value accounting reporting.
A)True
B)False
Q4) US SFAS 33 inflation accounting
A) used only current cost accounting
B) was only experimental
C) used only general purchasing power accounting
D) allowed the use of either general purchasing power or current cost disclosures
Q5) Professor Limperg believed
A) in general purchasing power accounting
B) that income is a function of revenues and replacement values
C) in a weak relation between economics and accounting
D) in the gold standard
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Chapter 12: Corporate Governance and Control of Global Operations
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Q1) Organizational structure is part of A) informal control mechanisms.
B) structural mechanisms.
C) organizational culture.
D) lateral relations.
Q2) The COSO monitoring component
A) assesses the quality of the system's performance over time
B) assures that no fraud will occur
C) sets the tone of the organization
D) is required by FASB
Q3) Responsiveness to local conditions results in A) global integration.
B) differentiation.
C) worldwide innovation.
D) a common corporate culture.
Q4) Research on international firms shows a lack of association between the proportion of outside directors and firm performance.
A)True
B)False
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Chapter 13: Foreign Exchange Risk Management
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Q1) In terms of derivatives, FASB Statement 52 deals with
A) forward contracts and futures contracts.
B) forward contracts and currency swaps.
C) all types of derivatives.
D) options but not forwards.
Q2) An option where the holder has the right to sell foreign currency to the writer of the option is a
A) forward option.
B) put option.
C) call option.
D) swap option.
Q3) If the spread between a forward and the spot is negative, the currency is at a premium.
A)True
B)False
Q4) The premium or discount is
A) adjusted for foreign exchange gains and losses over the life of the contract.
B) an adjustment to the purchases account.
C) is taken to the income statement when the contract is entered into.
D) is deferred until RadCo pays the German supplier.
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Chapter 14: International Budgeting and Performance Evaluation
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Q1) Which of the following does not accurately describe economic value added.
A) It is after-tax operating profit minus the total annual cost of capital.
B) It includes the cost of debt and the cost of equity.
C) It is a measure of the value added or depleted from shareholder value in one period.
D) It requires that different costs of capital be used in different country settings.
Q2) Lessard and Lorange's study suggests that managers of foreign subsidiaries should be held accountable for foreign exchange affects.
A)True B)False
Q3) Which of the following is not true concerning the performance evaluation of global innovators.
A) They need relatively flexible performance evaluation systems.
B)They rely more on behavioral controls.
C) The rely on outcome controls.
D) They need more autonomy than do implementors.
Q4) For Japanese MNEs, sales is the most often used measure of performance.
A)True B)False
Page 16
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Chapter 15: International Auditing Issues
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Q1) The quality of the auditing profession in each country is a function of
A) the reputation of the accounting and auditing profession
B) the quality of the educational system
C) the certification process
D) all of the above
Q2) EU's Fifth Directive permits auditors to operate without restriction throughout the European Union.
False
A)True
B)False
Q3) Which country exempts small companies from an audit
A) Germany
B) United Kingdom
C) United States
D) Canada
Q4) The IFAC is active in all of the following areas except A) education
B) ethics
C) metric standards
D) information technology
Page 17
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Chapter 16: International Taxation Issues
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Q1) A tax that is applied at each stage of the production process is known as a
A) corporate income tax.
B) withholding tax.
C) value-added tax.
D) sales tax.
Q2) Assume that a U.S. company has a subsidiary in the United Kingdom that earned $100,000 (translated from pounds to dollars) in 1996 at a tax rate of 40 percent. The tax rate in the United States is 34 percent, and the withholding tax rate on dividends is 5 percent. If the subsidiary declares a 100% dividend, how much of its income is included in U.S. taxable income?
A) $100,000
B) $ 60,000
C) $ 39,600
D) nothing.
Q3) The total amount of branch profits included in parent income includes the foreign exchange gain.
A)True
B)False
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