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TEST BANK
International Accounting, 6th Edition
by Doupnik. Finn & Gotti All Chapters 1 to 12
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TABLE OF CONTENTS
Chapter 1:Introduction to International Accounting
Chapter 2:Worldwide Accounting Diversity
Chapter 3: International Convergence of Financial Reporting
Chapter 4:International Financial Reporting Standards: Part I
Chapter 5:International Financial Reporting Standards: Part II
Chapter 6:Foreign Currency Transactions and Hedging Foreign Exchange Risk
Chapter 7:Translation of Foreign Currency Financial Statements
Chapter 8:International Taxation
Chapter 9:International Transfer Pricing
Chapter 10:Management Accounting Issues in Multinational Corporations
Chapter 11:Auditing and Corporate Governance: An International Perspective
Chapter 12: International Sustainability Reporting
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Chapter 01 6e
1) Which of the following groups is a supranational
organization?
A) International Accounting Standards Board
B) Organization for Economic Cooperation and Development
C) International Federation of Accountants
D) All of these answers are correct.
2) Determination of net present value involves:
A) forecasting future profits and cash flows.
B) discounting future cash flows back to their present value.
C) analysis on an after-tax basis.
D) All of these answers are correct.
3) In which of the following levels can international accounting be defined?
A) Supranational organizations
B) Company
C) Country
D) All of these answers are correct.
4) Which of the following functional areas is included in the study of international
accounting?
A) Financial accounting
B) Managerial
C) Taxation
D) All of these answers are correct.
5) The factor used to convert from one country's currency to another country's currency
is called the:
A) interest rate.
B) cost of capital.
C) exchange rate.
D) strike price.
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6) What is the term used to describe the possibility that a foreign currency will
decrease in U.S. dollar value over the life of an asset such as Accounts
Receivable?
A) Foreign exchange translation
B) Foreign exchange risk
C) Hedging
D) Foreign currency options
7) Foreign exchange risk arises when:
A) business transactions are denominated in foreign currencies.
B) sales are made to customers in a domestic country.
C) goods or services purchased from suppliers in a foreign country are
denominated in domestic currency.
D) auditing reports are prepared in a foreign currency.
8) In international accounting, a "hedge" is:
A) a business transaction made to reduce the exposure of foreign exchange risk.
B) the legal barriers in various divisions of a multinational company.
C) the loss in US dollar resulting from a decline in the value of the US dollar
relative to foreign currencies.
D) a form of foreign direct investment.
9) Purchasing an option to buy foreign currency at a predetermined exchange rate
in order to reduce exchange risk is called:
A) transfer pricing.
B) hedging.
C) translating.
D) cross-listing.
10) What term is used to describe the process of reducing foreign exchange risk?
A) International accounting
B) Exposure
C) Hedging
D) Globalization
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11) What is the advantage of foreign direct investment?
A) Helps in retaining advantage over competition
B) Reduces transportation costs
C) Creates a company tailored to a foreign market's unique characteristics
D) All of these answers are correct.
12) How should we recognize the difference in the value of a receivable in a foreign
currency at the time it was recorded and the time the cash was received?
A) As an adjustment to stockholders' equity
B) As an adjustment to purchases
C) As an extraordinary capital expenditure
D) As a prior period adjustment
13) What currency is used in the United Kingdom?
A) Crown
B) Euro
C) British pound
D) UK dollar
14) Which of these European countries does NOT use the Euro as its domestic currency?
A) France
B) United Kingdom
C) Ireland
D) The Netherlands
15) Which of the following terms is used to describe the combining of the financial
statements of all subsidiaries, both foreign and domestic, into the financial
statements of the parent?
A) Convergence
B) Hedging
C) Consolidation
D) Incorporation
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16) Why is auditing a multinational corporation potentially more difficult than auditing an
entity that has only domestic operations?
A) Language differences
B) Cultural differences
C) Multiple sets of accounting standards
D) All of these answers are correct.
17) What is the entry point for most companies into the world of international business?
A) Transfer pricing
B) Exporting
C) Foreign direct investment
D) Cross-listing on international stock exchanges
18) For a U.S. multinational corporation, consolidating the financial statements of
foreign subsidiaries requires two steps. First, the foreign subsidiary's statements
must be restated according to the U.S. GAAP. The next step is to:
A) convert the account balances into U.S. dollars.
B) determine the exchange rate gain or loss.
C) calculate the translation adjustment.
D) restate the income using international accounting standards.
19) When setting transfer prices among international subsidiaries, the corporation must:
A) make sure that the total tax is minimized.
B) ensure that the transfer prices are acceptable to the taxing authorities in the
countries involved.
C) do whatever it takes to make taxes paid in the United States as low as possible.
D) follow the transfer pricing policy used for domestic transfers.
20) 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
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21) What is a key objective of a company's performance evaluation system?
A) To determine how much to pay executives in bonuses and other compensation
B) To ensure that the domestic and foreign operations are achieving their
objectives
C) To control foreign subsidiaries
D) To assess the effect of foreign exchange rates on published financial
statements
22) What is the primary role of internal auditing in a multinational corporation?
A) To assist the external auditors in completing the financial statement audit in
a timely fashion
B) To make sure that employees comply with local customs and traditions
C) To ensure that corporate policies and procedures are being followed and
to assess operating efficiency
D) To prepare the consolidated financial statement of the corporation in
compliance with international accounting standards
23) Belmonte Corporation, with a division located in Germany, must translate its
financial statements from euros to U.S. dollars. What is the major accounting
issue involved in translation?
A) Most accountants are not conversant in foreign currency exchange.
B) U.S. GAAP may differ from German GAAP.
C) The U.S. dollar has been steadily falling relative to the euro.
D) The resulting balance sheet may not balance.
24) The ownership and control of foreign assets, such as a manufacturing plant, is called:
A) a hedge.
B) foreign direct investment.
C) an option.
D) derivatives.
25) What is a "greenfield" investment?
A) Farm land held for speculation
B) Foreign direct investment whereby a new facility is constructed abroad
C) Purchasing an existing facility as a foreign direct investment
D) A foreign investment that has been approved by the Environmental
Protection Agency
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26) Which of the following is an example of a "greenfield" investment?
A) Nike contracts with a footwear company in China to make athletic shoes.
B) A Chinese oil company buys a U.S. oil company.
C) Toyota, a Japanese automaker, builds an assembly plant in Ohio.
D) Daimler, a German automaker, merges with Chrysler, a U.S. automaker.
27) 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 these answers are correct.
28) A translation adjustment may be necessary when:
A) notes to financial statements are converted from one language to another.
B) foreign currency financial statements are converted to another currency.
C) purchasing goods from a domestic company.
D) hedging foreign currency.
29) What is "transfer pricing?"
A) The cost to convert from one country's GAAP to another country's GAAP
B) The value of sales made in a foreign country
C) The prices established to record an intercompany sale
D) The taxes paid on sales in a foreign country
30) ABCO Corporation has its two wholly owned subsidiaries, Delta and Parry, in
Country A and Country B, respectively. Parry purchases a part for its production
from Delta. Country B has a higher tax rate than Country A. To minimize the
corporation's overall income tax, how should ABCO set its transfer prices between
its subsidiaries?
A) Delta should sell parts to Parry at low prices.
B) Delta should sell parts to Parry at high prices.
C) It doesn't matter what transfer price is used because the subsidiaries are
part of the same company.
D) Transfer pricing does not affect the total tax paid by the corporation.
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31) Which of the following is a reason for the tremendous increase in the flow of
foreign direct investment from 1990 to 2020?
A) The relaxation of transfer pricing regulations
B) The liberalization of investment laws in many countries
C) The similarities in tax rates and tax laws across the globe
D) The universal application of U.S. GAAP accounting standards
32) What is KPMG?
A) It is a Dutch manufacturing company with plants in over 50 countries worldwide.
B) It is an international public accounting firm.
C) It is the largest of the multinational corporations listed on the NYSE.
D) It is a governmental agency whose aim is promoting international business.
33) When a foreign subsidiary pays dividends to its U.S. parent, this process is known as:
A) repatriation.
B) the reverse authoritative principle.
C) income-splitting.
D) asset management.
34) Many countries have recently liberalized their investment laws. What is the primary
reason for these actions?
A) To make it more difficult for multinational companies to compete with
domestic corporations
B) To encourage foreign direct investment
C) To enable funds to flow out of their country more easily
D) To make taxing foreign companies easier
35) Which of the following statements is true about international transfer pricing?
A) It is a violation of the Foreign Corrupt Practices Act.
B) It is accomplished using guidelines set up by the FASB and IASB
C) It can be used to minimize the amount of worldwide taxes.
D) It cannot be regulated by countries.
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36) The practice of having the stock listed and traded on several foreign stock
exchanges is known as:
A) SEC registration.
B) initial public offering.
C) consolidation.
D) cross-listing.
37) 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 these answers are correct.
38) Which of the following is a reason a company might cross-list itself on a
foreign stock exchange?
A) It wants to hedge against currency fluctuations.
B) It is less expensive than listing itself solely on a domestic exchange.
C) It wants to obtain acquisition currency for acquiring a foreign company.
D) It is required for accomplishing foreign direct investment.
39) Why would a company want its stock cross-listed on the stock exchanges of
several countries?
A) To make financial reporting less burdensome for its accounting firm
B) In order to use International Financial Reporting Standards
C) To gain access to more financial resources than are available in its home
country
D) All of these answers are correct.
40) What group is primarily responsible for the creation of International Financial
Reporting Standards (IFRS)?
A) Financial Accounting Standards Board (FASB)
B) International Forum on Accountancy Development (IFAD)
C) International Federation of Accountants (IFA)
D) International Accounting Standards Board (IASB)
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41) Which of the following is an advantage of having a single set of accounting
standards used worldwide?
A) Reduced accounting costs for multinational corporations
B) Increased power of the FASB
C) Reduced number of multinational corporations on the NYSE
D) Increased diversity of accounting methods used by multinational corporations
42) Assume that ABCO is a U.S. multinational corporation. Its foreign subsidiaries must
report income in their respective countries according to GAAP in those countries.
How must ABCO report its consolidated financial statements?
A) ABCO must choose any one country's accounting standards and
combine the subsidiary reports into the parent company's statements
using that one country's GAAP.
B) Since the company is operating in several different countries, the
International Accounting Standards must be used for the consolidated
financial statements.
C) Since ABCO is a U.S. corporation, U.S. generally accepted accounting
principles, or GAAP, must be used for the consolidated financial statements.
D) On the consolidated financial statements, each subsidiary's financial results
must be shown in the currency of the country where the subsidiary is
located.
43) In 2020, the country with the largest amount of exports was:
A) the United States of America.
B) China.
C) Japan.
D) Germany.
44) Which of the following ratios is used in the calculation of the multinationality index
(MNI)?
A)
B)
C)
D)
Foreign working capital to total working capital
Foreign cash to total cash
Foreign employment to total employment
Foreign loans to total loans
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45) The number of companies involved in international trade has grown significantly in
recent years. What percent of U.S. exporters are relatively small companies (i.e.
less than 20 employees)?
A) Less than 5%
B) 10%
C) More than 35%
D) Less than 20%
46) OECD is an important supranational entity. What do the letters OECD stand for?
A) Organization of Electrical Companies Directorate
B) Oil Exporting Countries and Developers
C) Organization for Economic Cooperation and Development
D) Oil Exporting Corporations and Divisions
47) What countries are collectively known as "the triad"?
A) France, Spain, and Italy
B) Germany, Russia, and China
C) United States, Japan, and Western Europe
D) United States, Canada, and Mexico
48) Which of the following is true about foreign direct investment?
A) It is a means of reducing transportation costs in export sales.
B) Since the 1980s, foreign direct investment has been relatively stable worldwide.
C) Only very large corporations are undertaking foreign direct investment.
D) It refers only to the amount of money U.S. corporations put into non-U.S.
businesses.
49) In the context of multinational corporations, the United States, Japan, and
Western Europe are collectively known as the:
A) G8.
B) Commonwealth.
C) triad.
D) OECD.
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50) In 2009 what share of the world's gross domestic product (GDP) was generated
by the 100 largest multinational companies?
A) 4%
B) 12%
C) 50%
D) 75%
51) What does "multinationality" mean?
A) Geographical distribution of sales, assets, and employees of the company
B) The diversity of languages spoken at a company's headquarters
C) The number of stock exchanges where a company's shares are listed
D) None of these answers are correct.
52) In 2020, the most popular location for total foreign direct investment (FDI) among
OECD countries was:
A) France.
B) China.
C) the United States.
D) Australia.
53) The following data relates to Alpha Incorporated and Sigma
Solutions:
Ratios
Foreign Assets/Total Assets
Foreign Sales/Total Sales
Foreign Employment/Total Employment
Alpha
Incorporated
57
60
63
Sigma
Solutions
63
66
60
Which of the following statements is true of Alpha and Sigma?
A) Sigma Solutions is more multinational as its ratio of foreign sales to total
sales is more than Alpha Incorporated
B) Alpha Incorporated is more multinational as its ratio of foreign employment
to total employment is more than Sigma Solutions.
C) Sigma Solutions has a higher multinationality index than that of Alpha
Incorporated
D) Alpha Incorporated has a higher multinationality index than that of Sigma
Solutions.
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54) As per U.S. corporate tax laws, which of the following statements is true of a
company that is incorporated in the U.S. and has a branch in a foreign country?
A) The credit for the amount of taxes already paid is given to arrange for
double taxation.
B) The credit for the amount of taxes already paid is given to charge for the
taxes not paid in the home country.
C) The credit for the amount of taxes already paid is given to refund the taxes
already paid in the home country.
D) The credit for the amount of taxes already paid is given to give relief for
the taxes paid in the foreign country.
55) 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
56) The operations of Silver Lights Incorporated in the U.S. are spread out in Ireland,
Finland, and Chile. Which of the following statements is true about the operations
of Silver Lights Incorporated?
A) The financial statements of Silver Lights must be prepared in local
currencies of the branch countries for consolidation purposes.
B) The external auditor of Silver Lights must be proficient in U.S. auditing and
financial reporting standards to audit the operations of branch offices.
C) Silver Lights Incorporated must give credit for the corporate tax paid as per
U.S. tax laws to provide relief from double taxation.
D) The transfer of parts between U.S. operations and other branches should be
at the highest acceptable price most profitable to Silver Lights Incorporated
keeping in view the rate of tax and tax authorities in respective nations.
57) In 2020, the country with the largest amount of imports was:
A) the United States.
B) China.
C) Japan.
D) Germany.
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58) In 2020, the most popular location for greenfield foreign direct investment (FDI) was:
A) France.
B) China.
C) the United States.
D) Australia.
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Answer Key
Test name: Chapter 01 6e
1) D
2) D
3) D
4) D
5) C
6) B
7) A
8) A
9) B
10) C
11) D
12) A
13) C
14) B
15) C
16) D
17) B
18) A
19) B
20) D
21) B
22) C
23) D
24) B
25) B
26) C
27) D
28) B
29) C
30) B
31) B
32) B
33) A
34) B
35) C
36) D
37) C
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38) C
39) C
40) D
41) A
42) C
43) B
44) C
45) C
46) C
47) C
48) A
49) C
50) A
51) A
52) C
53) C
54) D
55) C
56) D
57) A
58) C
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Chapter 02 6e
1) 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
2) It is generally believed that the 1997 financial crisis in East Asia was partly due to
accounting factors in that part of the world. Which of the following accounting
values was lacking in that part of the world and thereby contributed to the crisis?
A) Professionalism
B) Statutory control
C) Uniformity
D) Transparency
3) Which of the following is NOT a problem caused by accounting diversity?
A) Lack of qualified international auditors
B) Preparation of consolidated financial statements
C) Access to foreign capital markets
D) Comparability of financial statements
4) Differences in legal systems used in various countries have been cited as one
reason for diversity in accounting practices. What are the major types of legal
systems?
A) Commercial law and accounting law
B) Rules and regulations
C) Written law and unwritten law
D) Common law and code law
5) The accounting standards in code law countries tend to be:
A) very detailed.
B) formulated by organizations such as the FASB.
C) stated generally without much guidance on accounting procedures.
D) very conservative.
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6) What is likely to be the source of accounting standards in common law countries?
A) Tax law
B) Non-government entities such as the FASB
C) Federal and local legislatures
D) The International Accounting Standards Board
7) What is the likely result when accounting rules are left up to professional
associations rather than being legislated by governmental bodies?
A) Very general accounting rules are created, as in code law countries.
B) Very detailed rules for practice are created, as in common law countries.
C) Very general accounting rules are created, as in common law countries.
D) Very detailed rules for practice are created, as in code law countries.
8) 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.
9) In code law countries such as Germany, France, and Japan, tax law and accounting
standards tend to be:
A) unrelated.
B) very different.
C) general.
D) detail oriented.
10) If most of a country's business financing comes from families, banks, and the
government, what should we expect in terms of information disclosure to the
public?
A) Relatively little disclosure because the public isn't a major factor
B) A great deal of disclosure because it will be the only way for interested
parties to learn about the company
C) Complete openness of accounting records
D) No disclosure at all
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11) In countries such as the U.S., there is great demand for public disclosure of
accounting information. What is the reason for this?
A) Corporate management isn't trustworthy.
B) Businesses rely heavily on financing through issuance of stock to the public.
C) The American populace is better able to read financial statements than
people in other countries.
D) U.S. government officials are generally members of corporate boards of
directors and can get all the information they require.
12) Historical cost is the primary basis for asset valuation under U.S. GAAP. Why is
historical cost NOT as important in the accounting systems of Latin America as in
the U.S.?
A) Historical costs are too difficult to calculate in the currencies used in
Central and South America.
B) The countries of Latin America have experienced very high rates of inflation,
which would make historical costs meaningless to readers of financial
statements.
C) There is very little foreign direct investment in the countries of Latin America,
so few assets need to be accounted for.
D) In Latin America, asset prices are very stable, making historical costs
equal to replacement costs, so it doesn't matter which valuation basis
is used.
13) In the United States, conformity between presentation of the financial statements
and the tax statements is required only for:
A) goodwill.
B) depreciation.
C) gains or losses on securities.
D) the use of the LIFO inventory cost flow assumption.
14) In some countries, financial accounting and tax accounting are so closely related
that there is very little need to account for deferred income taxes. Which of the
following countries has a financial accounting system that is most different from its
tax laws?
A) United States of America
B) Japan
C) Germany
D) France
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15) In the Nobes classification of accounting systems, micro-based accounting
systems are oriented toward:
A) government economics.
B) business practices.
C) tax laws.
D) code law.
16) According to the research of Christopher Nobes, the most relevant factor in
determining the purpose of financial reporting is:
A) the financing system of the country.
B) religious differences across countries.
C) the population of the country.
D) the strength of the country's accounting profession.
17) According to the research of Christopher Nobes, what is the primary
determinant of the accounting systems in developing countries?
A) The nature of their financing system
B) The accounting system of countries that dominate their culture
C) The size of their capital market
D) The strength of their tax code
18) The "Fair Presentation/Full Disclosure Model" is a classification scheme used by:
A) Germany.
B) Japan.
C) the United States and the United Kingdom.
D) Brazil.
19) The extent to which hierarchy and unequal authority distribution in
institutions and organizations are accepted within a culture is referred to
as:
A) uncertainty avoidance.
B) masculinity.
C) individualism.
D) power distance.
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20) A cultural preference for a loosely knit social fabric rather than a tightly knit social
fabric is referred to as:
A) uncertainty avoidance.
B) masculinity.
C) individualism.
D) power distance.
21) 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) competitiveness.
C) individualism.
D) power distance.
22) What term is used to refer to a cultural aversion to ambiguous situations?
A) Uncertainty avoidance
B) Masculinity
C) Power distance
D) Individualism
23) A cultural preference for accounting systems that rely on compliance with legal
requirements is called:
A) professionalism.
B) uniformity.
C) statutory control.
D) optimism.
24) Countries such as the U.S. tend to value self-regulation of accounting. What term
is used to define this subculture?
A) Uniformity
B) Flexibility
C) Conservatism
D) Professionalism
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25) What does "transparency" mean in accounting?
A) An emphasis on confidentiality
B) Restricted disclosure of accounting information
C) Flexibility in the application of accounting standards
D) Openness of accounting information
26) What term is used to describe accounting standards that encourage risk-taking in
financial reporting?
A) Optimism
B) Conservatism
C) Professionalism
D) Transparency
27) In Gray's framework for accounting system development, which of the following
countries tends to have a relatively high degree of transparency in their
companies' financial statements?
A) Germany
B) Switzerland
C) United Kingdom
D) Saudi Arabia
28) In Gray's framework for accounting system development, which of the following
countries tends to show a relatively high preference for conservative accounting
standards?
A) Norway
B) United Kingdom
C) United States of America
D) Japan
29) In Gray's framework for accounting system development, optimism is a value of
accounting standards that would most likely be found in
A) Japan
B) Australia
C) Mexico
D) Brazil
.
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30) In Gray's framework for accounting system development, the cultural
dimensions of individualism, power distance, uncertainty avoidance, and
masculinity directly affect:
A) accounting systems.
B) accounting values.
C) external influences.
D) ecological influences.
31) Individualism, power distance, uncertainty avoidance, and cooperativeness are
examples of:
A) accounting values.
B) ecological factors.
C) cultural dimensions.
D) external forces.
32) The concepts of professionalism, uniformity, conservatism, and secrecy are
classified in Gray's framework for accounting system development as:
A) accounting values.
B) accounting systems.
C) institutional consequences.
D) cultural dimensions.
33) According to Gray's framework for accounting system development, which of the
following is directly affected by ecological influences, such as geography,
demography, and technology?
A) Accounting values
B) Accounting systems
C) Institutional consequences
D) Cultural dimensions
34) According to Gray's framework for accounting system development, the
counterpart to the accounting value of "secrecy" is:
A) professionalism.
B) transparency.
C) optimism.
D) flexibility.
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35) A cluster of Latin American countries indicated that the similarity of their
accounting systems was related to:
A) a common currency.
B) the importance of inflation.
C) the colonial influence of Spain.
D) the colonial influence of the United States of America.
36) The term "Class A Accounting" as it is used by the researcher Christopher Nobes
refers to:
A) conservative accounting systems.
B) the most efficient accounting systems.
C) accounting systems that primarily serve external shareholders.
D) accounting systems developed primarily for creditors and taxing authorities.
37) The term "Class B Accounting" as it is used by the researcher Christopher Nobes
refers to:
A) less preferred accounting systems.
B) less efficient accounting systems.
C) accounting systems that primarily serve external shareholders.
D) accounting systems that were developed primarily for creditors and taxing
authorities.
38) Which financial statement is provided by virtually all corporations worldwide?
A) Statement of Cash Flows
B) Statement of Changes in Financial Position
C) Balance Sheet
D) Statement of Changes in Non-current Assets
39) Which of the following financial statements is NOT universally included in annual
reports?
A) Balance sheet
B) Statement of cash flows
C) Income statement
D) All of the above statements are included in annual reports worldwide.
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40) 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.
41) What term is used to refer to the decision about whether to report an item in the
financial statements?
A) Capitalization
B) Recognition
C) Realization
D) Conservatism
42) What method of fixed asset valuation would most likely be used in countries that
regularly experience high rates of inflation?
A) Historical cost at subsequent balance sheet dates
B) Historical cost adjusted for changes in general purchasing power (GPP)
C) Fair value
D) Net present value at subsequent balance sheet dates
43) Under U.S. GAAP, fixed assets are generally reported on the balance sheet at their:
A) historical cost.
B) net realizable value.
C) fair value.
D) market value.
44) Which of the following bases for fixed asset valuation was being used by Mexico until
2008?
A)
B)
C)
D)
Historical cost
Historical cost later restated in terms of GPP
Historical replacement cost
Net realizable value
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45) The methods allowed by the IFRS for valuing property, plant, and equipment are:
A) historic cost and general purchasing power.
B) historic cost and fair value.
C) fair value and general purchasing power.
D) fair value and inflation-adjustment.
46) In terms of level of detail provided in the individual financial statements, the U.S. tends
to:
A)
B)
C)
D)
emphasize more line items on the face of the financial statements.
rely less on footnote disclosure.
condense the amount of line items and supplement with more footnote detail.
use footnotes only when absolutely required by GAAP.
47) Assets are commonly shown in order of their liquidity, or in reverse order of their
liquidity. What is liquidity?
A) Liquidity refers to how easily the assets are converted to cash.
B) Liquidity means that assets are inflation-adjusted.
C) Liquidity refers to whether the asset is depreciable or not.
D) Liquidity means that the assets are closely matched to specific liabilities.
48) Which of the following statements is true about the comparability of financial
statement of the United States and the United Kingdom?
A) The result of Latin American colonialism is the large number of countries
with the United Kingdom's influence on their accounting practices.
B) The financial statements of companies in the United States and the United
Kingdom are comparable as they are prepared after adjusting inflation, which
is a critical factor affecting accounting practice.
C) The basic principle followed by both countries in preparing financial
statements is government economics and government tax and legal
framework.
D) The accounting practices of both the countries are oriented toward the
decision needs of a large number of investors and creditors.
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49) According to Gray's framework (which is an extension of Hofstede's model of
cultural pattern), which of the following is true about accounting system
development?
A) Accounting system development is mainly influenced by a country's
constitutional framework.
B) Countries following limited disclosures adhere less strictly to the
notion of conservatism in the measurement of assets and liabilities.
C) Accounting system development is influenced by a less conservative
approach resulting in the development of short-term oriented
accounting practices.
D) The external factors have a direct influence on the development of
institutional framework leading to the development of accounting
systems.
50) Which of the following is the primary purpose of preparing a statement of added value?
A) To show the value added to products while at production
B) To show the distribution of added value by the company among stakeholders
C) To calculate the net taxable income of the company
D) To show the costs in addition to gross payroll that the company incurs
related to its labor force
51) 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.
52) Which of the following is an example of countries where public companies are
required to file separate parent company-only financial statements?
A) the U.S. and Britain
B) China, Pakistan, and India
C) Australia and New Zealand
D) France, Germany, and Italy
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53) What is the main reason public companies are required to file separate parent
company-only financial statements?
A) For efficiency
B) For better information to shareholders
C) For clarity and informativeness
D) For taxation purposes
54) Where are private companies required to file a set of financial statements
(balance sheet, income statement, and notes only) with a national registry?
A) United States and the United Kingdom
B) Australia and New Zealand
C) India and China
D) Members of the European Union
55) What country is an example of no financial reporting requirement for private
companies?
A) United Kingdom
B) Australia and New Zealand
C) India
D) United States
56) What is Anglo-American Accounting?
A) It is an association of British and American accounting regulatory agencies.
B) The accounting systems used in the United States, United Kingdom,
and other English-speaking countries.
C) This refers to the basis used by the IASB to judge the appropriateness of
international accounting standards.
D) All of the answer choices are correct.
57) Which of the following statements is NOT true about Anglo-Saxon Accounting?
A) There is a strong reliance on professional judgment.
B) Financial reporting focuses on the firm with an investor orientation.
C) There is a strong emphasis on measurement of taxable income.
D) Principle of fair presentation is predominant in financial reporting.
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58) Which of the following statements is NOT true about Anglo-Saxon Accounting?
A) There is a strong reliance on professional judgment.
B) There is an agreement on the interpretation of the principle of fair presentation.
C) There is a stronger emphasis on substance of reports rather than the form of
reports.
D) Audits report on the adherence to the principle of fair presentation.
59) Which of the following is a difference between the U.S. and other Anglo-Saxon
countries in terms of accounting standards?
A) The U.S. does not adhere to the "true and fair view" approach.
B) The U.S. is more private sector-oriented.
C) The U.S. always follows a conceptual framework when developing
accounting standards.
D) The U.S. standards are becoming more rigid than the U.K. standards.
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