International Accounting Study Guide
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Course Introduction
International Accounting explores the principles and practices involved in accounting within a global context. This course examines the differences and similarities between various countries accounting standards, focusing on the International Financial Reporting Standards (IFRS) and their comparison with other frameworks such as US GAAP. Students learn about the challenges of consolidating financial statements across borders, the impact of currency exchange rates on financial reporting, and the role of multinational organizations in shaping accounting practices. Emphasis is placed on understanding the legal, cultural, and economic factors that influence international accounting, preparing students to interpret and analyze financial statements for global operations.
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International Accounting 4th Edition by Timothy Doupnik
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Page 2
Chapter 1: Introduction to International Accounting
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Q1) Which of the following groups is a supranational organization?
A)United Nations
B)Organization for Economic Cooperation and Development
C)International Federation of Accountants
D)All of the above
Answer: D
Q2) What percentage of world trade is represented by manufactured products?
A)64.6%
B)22.5%
C)8.5%
D)75.5%
Answer: A
Q3) Which of the following ratios is used in the calculation of the multinationality index (MNI)?
A)Foreign working capital to total working capital
B)Foreign cash to total cash
C)Foreign employment to total employment
D)Foreign loans to total loans
Answer: C
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Chapter 2: Worldwide Accounting Diversity
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Q1) What is the equivalent of the common stock account on a U.S.balance sheet on the balance sheet of a British company?
A)Capital redemption reserve
B)Share premium account
C)Own shares held
D)Called-up share capital
Answer: D
Q2) Gray argues that national cultural values affect accounting values.If Country X ranks low on uncertainty avoidance, which of the following statements would be true?
A)The country would rank high on the accounting values of uniformity.
B)The country would rank high on the accounting values of secrecy.
C)The country would rank low on the accounting values of professionalism.
D)The country would rank low on the accounting values of conservatism.
Answer: D
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Chapter 3: International Convergence of Financial Reporting
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Q1) What was the "Norwalk Agreement?"
A)A pledge between the Financial Accounting Standards Board in the U.S.and the IASB to make their reporting standards compatible.
B)A concession by the Financial Accounting Standards Board in the U.S.to adopt IFRS as soon as possible.
C)It is a treaty between the United States and the European Union to make their accounting standards converge.
D)It was an agreement signed in Norwalk, Connecticut in 2002 to make English the official language of the IASB.
Answer: A
Q2) What basis does the International Accounting Standards Board use in developing IFRS?
A)Detailed rules to govern accounting practice
B)A framework for deriving general principles
C)Typical tax laws of western nations
D)Exceptions or unusual circumstances that require special attention
Answer: B
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Chapter 4: International Financial Reporting Standards:
Part I
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Q1) 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.
Q2) Which of the following items should be included in the cost of property, plant, and equipment under IAS 16?
A)All costs directly attributable to getting the asset to the proper location
B)Import duties and taxes
C)Estimated costs of removing the asset
D)All of these should be considered part of the cost of the asset.
Q3) Using IAS 36, what is the amount of impairment loss?
A) 18,000
B) 37,000
C) 15,000
D) 25,000
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Chapter 5: International Financial Reporting Standards:
Part II
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Q1) Under U.S.GAAP, with respect to equity-settled share-based payments, if the fair value of the equity instrument is used, the value is determined:
A)at the earlier of the date a commitment for performance is reached or the date the services are actually completed.
B)at the date the services are actually completed.
C)at the date a commitment for performance is reached.
D)None of the above
Q2) Under IAS 37, inflows of resources that are "virtually certain" to be received should be:
A)disclosed as contingent assets in the notes to the financial statements.
B)recognized as assets.
C)undisclosed until management is absolutely certain that resources will be received.
D)reported only in the cash flow statement.
Q3) Under IAS 12, Income Taxes, which of the following issues are covered?
A)Temporary differences
B)Operating loss carry forwards
C)Tax credit carry forwards
D)All of the above
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Page 7
Chapter 6: Comparative Accounting
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Q1) Since the 1980s accounting regulation in the United Kingdom has been legislated more than it had been previously.What is the primary cause for this change from professional self-regulation to government regulation?
A)High profile scandals in the British business community
B)Influence of the United States on the ICAEW
C)Directives from the European Union
D)All of the above
Q2) In Japan, what is the most commonly used ending date for accounting periods?
A)December 31
B)March 31
C)June 30
D)September 30
Q3) What was the primary influence on Germany's accounting regulations from the mid-1980's until very recently?
A)The Stock Corporation Law
B)The directives of the European Union
C)The Companies Act
D)The U.S.Financial Accounting Standards Board
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Chapter 7: Foreign Currency Transactions and Hedging
Foreign Exchange Risk
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Q1) Assume that Amazing Corporation enters a forward contract on October 1, 20x1 to sell £100,000 six months hence, on April 1, 20x2.How should Amazing Corporation report the forward contract on its December 31, 20x1 financial statements?
A)Asset $1,950
B)Liability $1,950
C)Asset $1,000
D)Asset $950
Q2) Under International Accounting Standards Board rules, what method is required to account for foreign currency transactions?
A)A one-transaction perspective must be used.
B)The two-transaction perspective must be used.
C)A sale is not recorded until payment is received and converted to U.S.dollars.
D)A sale is not recorded until payment is received in the foreign currency.
Q3) What is a foreign currency transaction?
A)It is another name for an international transaction.
B)It is a transaction that involves payment at a date sometime in the future.
C)It is a business deal denominated in a currency other than a company's domestic currency.
D)It is an economic event measured in a currency other than U.S.dollars.
Page 9
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Chapter 8: Translation of Foreign Currency Financial Statements
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Q1) A Danish subsidiary of a U.S.corporation recorded a building it purchased in 2010 for 100,000,000 krone, when the exchange rate was $0.132/krone.The current exchange rate is $0.163/krone.Under the temporal method, how should the translated amount of the restated asset be interpreted?
A)The U.S.parent would have to pay $16,300,000 to acquire the building today.
B)The U.S.parent would have had to pay $13,200,000 to acquire the building in 2010.
C)The building is worth $13,200,000 to the U.S.parent today.
D)None of the above
Q2) What is the cause of balance sheet exposure?
A)Converting subsidiary account balances to balances denominated in the parent company's currency at historical exchange rates
B)Completing international transactions in currency other than the currency of the home company
C)Translating subsidiary account balances to amounts denominated in the parent company's currency
D)None of the above
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Page 10
Chapter 9: Additional Financial Reporting Issues
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Q1) Mega Corporation acquired 65% of the voting shares of Forko Ltd.Mega consolidated its accounts by restating assets and liabilities of the subsidiary at fair value on the date the shares were acquired.Which of the following methods for accounting for the business combination is being used by Mega Corporation?
A)Purchase method
B)Fair value method
C)Pooling method
D)Current replacement cost method
Q2) Under ARB 51, "controlling financial interest" is:
A)criterion for consolidation purposes.
B)defined as 50% ownership of another entity's voting shares.
C)the ability to make decisions about another entity's activities indirectly.
D)the right to contribute to the expected residual returns of another entity as they occur.
Q3) How is negative goodwill accounted for under U.S.GAAP?
A)There is no rule for negative goodwill, because there is no such thing.
B)It is capitalized and amortized over a period of no more than 40 years.
C)It is treated as an extraordinary loss on the consolidated income statement.
D)It is treated as an extraordinary gain on the consolidated income statement.
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11
Chapter 10: Analysis of Foreign Financial Statements
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Q1) On what SEC form must foreign corporations with shares listed on U.S.stock exchanges present a reconciliation of net income and stockholders' equity to U.S.GAAP?
A)Form 10-Q
B)Form 10-K
C)Form 20-F
D)Form 8-Q
Q2) What is the best short-term solution to alleviate problems of financial statement analysis arising from international differences in accounting terminology?
A)Require all countries to conform to IASB standards.
B)Create standard financial statement terminology for all companies around the world.
C)Analysts should carefully read the notes to financial statements and learn about the business environments of countries they analyze.
D)Convert all financial statements into English.
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12
Chapter 11: International Taxation
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Q1) What is the meaning of "tax system neutrality?"
A)Taxes should be minimized.
B)Tax systems should not be a major factor in business decisions.
C)Tax policies should be unbiased.
D)Taxes in one jurisdiction are offset by tax credits in another jurisdiction.
Q2) Which of the following is a benefit of tax treaties?
A)They can be used to define tax jurisdiction.
B)They may be used to reduce withholding taxes.
C)They facilitate the exchange of information between countries.
D)All of the above
Q3) What is a major limitation to the apparent incentive of tax holidays?
A)If an MNC is taxed on worldwide income, it will eventually pay tax on the foreign income when it is repatriated.
B)Income earned by multinational corporations must remain in the foreign country offering the tax holiday.
C)The tax holidays are only available to large multinational corporations of wealthier nations.
D)Tax holidays are offered only by governments with the ten weakest economies.
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Chapter 12: International Transfer Pricing
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Q1) Which of the following is NOT within the power of the Internal Revenue Service (IRS) under Internal Revenue Code (Section 482)?
A)Authority to audit international transfer prices
B)Authority to adjust international transfer prices
C)Authority to adjust a company's tax liability if the transfer price is deemed to be inappropriate
D)Authority to stop intercompany transactions
Q2) What is the term used for intercompany transactions from a subsidiary to a parent?
A)Upstream transfer
B)Horizontal transfer
C)International transfer
D)None of the above
Q3) 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
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Chapter 13: Strategic Accounting Issues in Multinational Corporations
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Q1) Which capital budgeting technique is preferred in all major industrialized countries?
A)Net present value
B)Internal rate of return
C)Payback period
D)There is no particular preferred capital budgeting technique across countries
Q2) 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
Q3) Cash flows related to a proposed capital investment project are subject to what kind of risk?
A)Economic risk
B)Financial risk
C)Political risk
D)All of the above
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Chapter 14: Comparative International Auditing and Corporate Governance
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Q1) Under Securities and Exchange Commission regulations, who may be a member of an audit committee for a listed company?
A)Any member of the corporate board of directors
B)Any member of the corporate board of directors who is not a Certified Public Accountant (CPA)
C)Only members of the corporate board of directors who do not have a material interest in the company
D)Any manager or director of the corporation
Q2) Which of the following is a limitation of SEC requirements for audit committee membership?
A)The expanded responsibilities make service on the committee less desirable to competent directors.
B)External auditors are unwilling to report to an independent audit committee.
C)The audit committee compromises the external auditor's independence.
D)Only the United Kingdom and the United States require audit committees, putting corporations in these countries at a disadvantage.
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Chapter 15: International Corporate Social Reporting
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Q1) The countries ratifying the Kyoto Protocol are committed to reducing greenhouse gases by how much from their 1990 level by 2011?
A)25%
B)10%
C)5%
D)50%
Q2) What effect has social and environmental legislation had on top management in Thailand?
A)Top management can be jailed for failure to make social and environmental disclosures.
B)There has been no motivation towards increased corporate social and environmental disclosures.
C)Top management is highly motivated to make social and environmental disclosures.
D)There is no social and environmental legislation in Thailand.
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