International Finance
Question Bank
Course Introduction
International Finance explores the financial management and decision-making processes of firms and institutions operating in a global environment. The course covers key topics such as foreign exchange markets, exchange rate determination, international monetary systems, and balance of payments. Students analyze the impact of international financial markets and institutions on corporate finance, learn to manage currency risk, and examine cross-border investment and financing decisions. Emphasis is placed on understanding the economic and political factors influencing international financial flows, as well as practical tools for hedging and managing international financial risks.
Recommended Textbook
International Accounting 5th Edition by Frederick D. S. Choi
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12 Chapters
677 Verified Questions
677 Flashcards
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Page 2
Chapter 1: Introduction to International Accounting
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Sample Questions
Q1) What is the primary provision of the Foreign Corrupt Practices Act?
A) To specify which corrupt practices are acceptable under U.S. law
B) To specify how to account for bribes paid by U.S. corporations to obtain business from foreign governments
C) To inform internal auditors how to detect fraud in multinational corporations
D) To prohibit U.S. companies from paying bribes to foreign government officials to obtain business
Answer: D
Q2) Which of the following is a reason for foreign direct investment?
A) To reduce costs of doing business
B) To protect domestic markets
C) To protect foreign markets
D) All of the above
Answer: D
Q3) Which of the following is the primary role of an internal auditor?
A) To ensure the adoption of IFRS by all foreign companies
B) To prepare the financial statements of the company
C) To uncover errors, inefficiencies, and fraud
D) The prepare the financial budgets for the company
Answer: C
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Chapter 2: Worldwide Accounting Diversity
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Sample Questions
Q1) A cultural emphasis on values of performance and achievement rather than values of relationships, caring, and nurturing is referred to as:
A) uncertainty avoidance.
B) masculinity.
C) individualism.
D) power distance.
Answer: B
Q2) Which of the following bases for fixed asset valuation was being used by Mexico until 2008?
A) Historical cost
B) Historical cost later restated in terms of GPP
C) Historical replacement cost
D) Net realizable value
Answer: B
Q3) International accounting diversity can be found in terms of:
A) the terminology used in the financial statements.
B) the amount of information disclosed in the financial statements.
C) the order of items in the financial statements.
D) All of the above evidence of accounting diversity.
Answer: D
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Chapter 3: International Convergence of Financial Reporting
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Sample Questions
Q1) Who was the first chairman of the International Accounting Standards Board?
A) Sir Walter Raleigh
B) Sir David Tweedie
C) Sir Paul McCartney
D) Sir Bryan Carsberg
Answer: B
Q2) The IASB has permitted the translation of International Financial Reporting Standards (IFRS) into how many languages?
A) None. They are only written in the official language of the IASB.
B) More than 30
C) More than 100
D) Only six languages: Chinese, English, German, Japanese, Russian, and Spanish
Answer: B
Q3) Which of the following is NOT a major concern related to convergence of international accounting standards?
A) The complicated nature of particular standards
B) The tax-driven nature of the national accounting regime
C) An overload of guidance on the first-time application of IFRS
D) IFRS language translation difficulties
Answer: C
Page 5
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Chapter 4: International Financial Reporting Standards:
Part I
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Sample Questions
Q1) When a patent or trademark is acquired in a business combination, what does IAS 38 say about recording these intangibles?
A) If they had not been previously recorded as separate assets by the acquired company, they should always be recorded as "Goodwill" on the balance sheet of the company acquiring them.
B) The cost of the intangibles should be expensed by the acquiring company on the merger date.
C) They should be recorded as separate intangible assets only if their useful life is indefinite.
D) They should be recorded as separate intangible assets if their fair value can be reliably measured.
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.
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Chapter 5: International Financial Reporting Standards:
Part II
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Sample Questions
Q1) Alpha Inc. has receivables from unrelated parties with a face value of $5,000. It transfers these receivables to bank for $4,500, without recourse. It will continue to collect the receivables, depositing them in a non-interest-bearing bank account with the cash flows remitted to the bank at the end of each month. It is not allowed to sell or pledge the receivables to anyone else and is under no obligation to repurchase the receivables from bank. Which of the following is the appropriate treatment for these Accounts receivables?
A) It should show these receivables in its Balance Sheet.
B) It should amortize these receivables.
C) It should derecognize these receivables.
D) It should derecognize these receivables if it retains the interest earned on these.
Q2) Which of the following statements is true of IAS 19?
A) It establishes guidance for measuring onerous contract.
B) It requires all past service costs to be recognized in net income in a subsequent period in which the benefit plan is changed.
C) Its revised version became effective in the year 2013.
D) It covers all employee benefits including share-based compensation.
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Page 7
Chapter 6: Foreign Currency Transactions and Hedging
Foreign Exchange Risk
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Sample Questions
Q1) 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
Q2) On December 1, 2001 Pimlico made sales to a customer in India and recorded Accounts Receivable of 10,000,000 rupees. The customer has until March 1, 2002 to pay. On December 1, 2001, Pimlico paid $500 for a put option to sell rupees at a strike price of $2.30 per 100 rupees on March 1, 2002, which was the spot rate on December 1, 2001. On December 31, 2001, the spot rate was $2.80 per 100 rupees and the option premium was $0.004 per 100 rupees. If the spot rate on March 1, 2002 was $2.45 per 100 rupees, what is the foreign currency exchange gain or loss that should be recorded that day?
A) $15,000 gain
B) $15,000 loss
C) $35,000 gain
D) $35,000 loss
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Page 8
Chapter 7: Translation of Foreign Currency Financial Statements
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Q1) Under U.S. GAAP, what method of translating foreign currency financial statements must be used for subsidiaries in highly inflationary economies?
A) Current rate method
B) Current/non-current method
C) Temporal method
D) Monetary/non-monetary method
Q2) According to FASB ASC 830, Foreign Currency Matters, which of the following conditions would indicate that a foreign subsidiary's functional currency is the foreign currency?
A) Sales price not affected by changes in exchange rate in the short-run
B) High volume of intercompany transactions
C) Sales in the local market not significant
D) Most of the subsidiary's financing comes from the parent.
Q3) Which of the following is a limitation of using the temporal method for translating foreign currency financial statements?
A) The translated asset and liability amounts have no meaningful interpretation.
B) The translation adjustment will usually have a negative impact on income.
C) Financial ratios after translation will be distorted.
D) All of the above are limitations of the temporal method.
Page 9
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Chapter 8: International Taxation
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Sample Questions
Q1) In the context of international taxation, the Bahamas, Lichtenstein, and Monaco are considered by the OEDC as:
A) tax holidays.
B) tax shelters.
C) tax havens.
D) tax centers.
Q2) What is a value added tax (VAT)?
A) It is the European version of a sales tax, which is paid by the purchaser based on sales price.
B) Taxes used in lieu of sales tax and incorporated into the price of a product or service.
C) The tax paid by a foreign corporation on its fixed assets.
D) This is the name of the corporate income tax in Canada, Australia, and the United Kingdom.
Q3) What is meant by the term "thin capitalization?"
A) Undervaluing foreign investments
B) Using as little debt financing as a country will allow
C) Minimizing the amount of equity capital used to fund foreign operations
D) Creating transparency in the methods used to fund foreign operations
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Chapter 9: International Transfer Pricing
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Sample Questions
Q1) In keeping with Internal Revenue Code, Clarence Company transfers goods to Marguerite Corporation, its foreign subsidiary, at the price Marguerite will sell the product to its customers, less the industry's average gross profit margin of 30%. What method of transfer pricing is Clarence using?
A) Cost-plus method
B) Comparable uncontrolled price method
C) Comparable profits method
D) Resale price method
Q2) Profit indicators that might be considered in applying the comparable profits method include the ratio of:
A) operating income to operating assets.
B) debt to equity.
C) receivables to net sales.
D) operating expenses to net sales.
Q3) What is the primary advantage of a negotiated transfer price?
A) It is objectively determined.
B) It reflects managers' ability to control cost.
C) It is based on arms-length transactions with unrelated parties.
D) It preserves managerial autonomy to make decisions.
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Page 11
Chapter 10: Management Accounting Issues in Multinational Corporations
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Q1) Influencing subordinates to behave in accordance with the goals and objectives of the organization is referred to as:
A) performance evaluation.
B) management control.
C) strategic planning.
D) goal congruence.
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) Where would a divisional manager look to find the targets she is expected to reach in the next fiscal year?
A) Strategic plan
B) Capital budget
C) Operating budget
D) Strategic formulation
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Page 12
Chapter 11: Auditing and Corporate Governance: An International Perspective
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Sample Questions
Q1) What reason has been given to explain the lack of well-developed auditing professions in less developed economies?
A) Inability to train auditors given the lack of educational systems.
B) Since creditors and investors are not major players in these economies, there is little need for audited financial statements.
C) Investors and creditors in these countries do not want external auditors attesting to financial statement reliability.
D) In these cultures, financial statements are presumed to be accurate and therefore do not require independent audits.
Q2) Which of the following is NOT a concern identified in the 2008 IFAC report "Financial Reporting Supply Chain-Current Perspectives and Directions"?
A) Governance in name, but not in spirit
B) Overregulation
C) The development of a checklist mentality
D) Trend towards less disclosure and transparency in business and financial reporting
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Chapter 12: International Sustainability Reporting
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Sample Questions
Q1) Which is not true of the Sustainability Accounting Standards Board (SASB)?
A) Its counterpart in traditional financial reporting is FASB
B) Its intended audience is explicitly the investment community
C) It was developed for the EU and later adopted by the US
D) All of the above are true.
Q2) Within the GRI, Social Standards:
A) Cover human rights and product responsibility
B) Require the entity to identify operations or suppliers that are at risk of employing child labor
C) Cover human rights and product responsibility & require the entity to identify operations or suppliers that are at risk of employing child labor
D) None of the above apply
Q3) In measuring an organization's carbon footprint using the Greenhouse Gas Protocol, which of the following is the most challenging to account for and measure?
A) Scope 1
B) Scope 2
C) Scope 3
D) Scope 4
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