Accounting for Global Operations Exam Questions
Course Introduction
Accounting for Global Operations provides an in-depth exploration of the accounting principles and practices essential for managing multinational businesses. The course covers topics such as foreign currency transactions, international financial reporting standards (IFRS), global tax considerations, transfer pricing, and the strategic implications of financial decisions in different regulatory environments. Students will analyze case studies and real-world scenarios to understand how organizations structure and report their operations across borders, ensuring compliance and optimizing financial performance in a complex global marketplace.
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International Accounting 4th Edition by Timothy Doupnik
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Chapter 1: Introduction to International Accounting
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Q1) Which of the following statements is true about U.S.taxation of foreign subsidiaries?
A)The U.S.income taxes income generated by subsidiaries incorporated in foreign countries.
B)U.S.multinationals do not pay tax on their worldwide income if incorporated in the U.S. C)Transfer pricing will eliminate taxes by the U.S.government on multinational corporations.
D)U.S.tax on foreign operations does not have to be paid until the income is brought back to the U.S.
Answer: D
Q2) 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.
Answer: A
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Chapter 2: Worldwide Accounting Diversity
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Q1) 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.
Answer: C
Q2) 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.
Answer: C
Q3) 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.
Answer: C
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Chapter 3: International Convergence of Financial Reporting
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Q1) 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
Q2) In November 2007, which of the following organizations removed the requirement that foreign private issuers using IFRS reconcile their financial statements to U.S.GAAP?
A)IASB
B)EU
C)SEC
D)FASB
Answer: C
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Page 5
Chapter 4: International Financial Reporting Standards:
Part I
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Q1) Under IAS 17, in a sale-leaseback transaction, how must the initial owner treat any gain on a finance lease?
A)Defer it and amortize it into income over the life of the lease.
B)Recognize it in income immediately.
C)Defer it until the end of the lease term, including extensions.
D)He/she can choose to either defer it or recognize it in income immediately.
Q2) What types of differences can cause issues between International Financial Reporting Standards and U.S.GAAP?
A)Measurement
B)Alternatives available
C)Disclosure
D)All of the above may be different between IFRS and U.S.GAAP.
Q3) Agro-World Technologies Inc.incurred $1,000,000 to construct a pilot plant to study the feasibility of building agricultural machinery more inexpensively for emerging economies.How would this cost be classified under IAS 38 (Intangible Assets)?
A)Research costs
B)Development costs
C)Neither research nor development
D)It could be either research or development, depending on management's wishes.
Page 6
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Chapter 5: International Financial Reporting Standards:
Part II
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Q1) The primary difference between IAS 37, and U.S.GAAP concerning the treatment of contingent liabilities pertains to:
A)definition of terms.
B)measurement.
C)classification on the balance sheet.
D)disclosure of relevant information.
Q2) Under IFRS 2, with respect to cash-settled share-based payments, when an employee has received stock appreciation rights, how is the fair value of those rights measured?
A)Using the consolidation method
B)Using an option pricing model
C)Using the dividend discount approach
D)All of the above
Q3) Under IAS 12, current and deferred taxes are measured on the basis of:
A)rates that have been enacted or substantively enacted by the balance sheet date.
B)current rates and rates anticipated when temporary differences reverse.
C)rates anticipated when temporary differences reverse.
D)rates prevailing when the entity provided goods or services.
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Chapter 6: Comparative Accounting
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Q1) Of the following British professional accounting associations, whose members CANNOT sign an audit report?
A)Institute of Chartered Accountants in England and Wales (ICAEW)
B)Association of Chartered Certified Accountants (ACCA)
C)Chartered Institute of Public Finance and Accountancy (CIPFA)
D)Institute of Chartered Accountants in Scotland (ICAS)
Q2) Mexican corporations can issue three types of stock-Series A, Series B, and Series N.Series A stock can only be owned by Mexican nationals.These shares must constitute at least what percentage of corporate voting rights?
A)51%
B)49%
C)25%
D)10%
Q3) Until recently, regulation of accounting practice in the United Kingdom had traditionally been left to:
A)the Parliament.
B)the accounting profession.
C)the securities exchange commission.
D)None of the above
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Chapter 7: Foreign Currency Transactions and Hedging
Foreign Exchange Risk
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Q1) 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.
Q2) What has occurred when one company arranges to buy a foreign currency sometime in the future, at an exchange rate quoted today?
A)The company has purchased a foreign currency option.
B)The company has entered a forward contract.
C)The currency has been devalued.
D)None of the above
Q3) How should discounts or premiums on forward contracts be treated if the derivative is hedging a foreign-currency-denominated asset?
A)Carried on the balance sheet until the contract is completed
B)Included in income in the period the derivative is acquired
C)Amortized over the life of the forward contract
D)None of the above
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Chapter 8: Translation of Foreign Currency Financial Statements
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Q1) Which of the following methods for translating foreign currency financial statements is no longer allowed under U.S.GAAP?
A)Temporal method
B)Current/Noncurrent method
C)Current rate method
D)None of the above methods are allowed under GAAP.
Q2) Under FASB ASC 830, Foreign Currency Matters, when the current rate method is used, how are translation adjustments treated in the consolidated financial statements?
A)As gains or losses on the current period consolidated income statement
B)As prior period adjustments to retained earnings of the parent
C)As part of other comprehensive income on the consolidated balance sheet
D)None of the above because the temporal method is not allowed under FASB ASC 830.
Q3) Which of the following items in the balance sheet is subject to accounting exposure?
A)Only assets
B)Only liabilities and owners' equity
C)All accounts translated at historical exchange rates
D)All accounts translated at current exchange rates
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Page 10
Chapter 9: Additional Financial Reporting Issues
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Q1) 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.
Q2) Which of the following countries requires companies to use current replacement cost accounting to prepare primary financial statements?
A)The Netherlands
B)Mexico
C)Brazil
D)None of the above
Q3) Under IFRS 8, which of the following criteria is NOT considered by all segments that are considered reportable business segments?
A)The segment must have revenue that is one-tenth or more of combined revenue.
B)The segment must have profit that is 10% or more of combined profit of all segments with profit.
C)The segment must have revenue that is more than half from external sources.
D)The segment must have assets that are 10% or more of combined segment assets.
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Chapter 10: Analysis of Foreign Financial Statements
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Q1) What is EDGAR?
A)It is a database provided by the London, England stock exchange that provides financial statement information on U.K.companies.
B)It is a database created by the U.S.Securities and Exchange Commission that provides reports of all corporations listed on the U.S.stock exchanges.
C)It is a database of reports filed electronically with the U.S.Securities and Exchange Commission.
D)It is a database that links users to U.S.company websites much like CAROL does in the U.K.
Q2) Which exchange rates should be used in order to appropriately analyze the trends in foreign financial statement data?
A)Historical exchange rates
B)Beginning of year exchange rates
C)Current exchange rates
D)Average exchange rates
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Chapter 11: International Taxation
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Q1) The exchange gain or loss on repatriated funds from a foreign branch is calculated by multiplying the nominal amount of the funds by:
A)the difference between the exchange rate at the beginning of the year and the exchange rate at the end of the year.
B)the difference between the exchange rate on the date of repatriation and the exchange rate used to translate the branch's pretax income.
C)the difference between the current exchange rate and the exchange rate at the end of the year.
D)the difference between the exchange rate on the date of repatriation and the exchange rate at the beginning of the year.
Q2) Which of the following is the most important type of Subpart F income?
A)Income from countries engaged in international boycotts
B)Income from foreign base companies
C)Income from insurance of U.S.risks
D)Income from illegal payments
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Chapter 12: International Transfer Pricing
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Q1) What is the advantage of an advance pricing agreement?
A)IRS (Internal Revenue Service) will not challenge the transfer price after the tax return is filed if the agreement is followed.
B)Worldwide taxes will be minimized.
C)The brief form explaining the transfer price to be used can be completed with minimal effort by the taxpayer but will reduce a tremendous amount of work later.
D)All of the above are advantages of APA.
Q2) Historically, which industry is found most at risk for a transfer pricing adjustment?
A)Consumer packaged goods
B)Pharmaceuticals
C)Petroleum
D)Manufacturing
Q3) Which is NOT a common risk associated with local authorities' scrutiny of a company's transfer prices?
A)Potential double taxation
B)Uncertainty as to the group's worldwide tax burden
C)Problems in relationships with local tax authorities
D)Discovery of a tax treaty violation
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Chapter 13: Strategic Accounting Issues in Multinational Corporations
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Q1) Why is management control particularly complex in decentralized multinational organizations?
A)Managers abroad are not as well-trained as managers of domestic operations.
B)Decision-making authority is not delegated to the local managers of foreign operations.
C)Managers of foreign operations may be motivated by local goals rather than parent's goals.
D)Financial risks are always higher for the local managers of foreign operations than for managers of domestic operations.
Q2) What is the effect of conducting a sensitivity analysis in capital budgeting?
A)It helps analysts to determine if results are particularly affected by specific estimates.
B)It complicates the process of making a decision when there are conflicting signals.
C)Preferences for one capital investment alternative over another will change.
D)All of the above
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Chapter 14: Comparative International Auditing and Corporate Governance
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Q1) What reason can be given for the importance of internal auditing in multinational corporations?
A)A serious lack of external auditors available to audit an international company
B)A growing demand for risk management skills possessed by internal auditors
C)Reluctance by multinational corporations to hire external auditors to comply with international regulations
D)Decline in the reputation of external auditors
Q2) In what countries would one expect auditing standards to evolve based on the needs perceived by the auditing profession?
A)Code law countries
B)Members of the European Union
C)Countries that follow common law
D)Countries with strong accounting laws
Q3) Who is considered to be the client for external auditors in the United Kingdom?
A)Corporate shareholders
B)The government
C)Society as a whole
D)All of the above
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Chapter 15: International Corporate Social Reporting
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Q1) Which country has not ratified the 2005 Kyoto Protocol?
A)Japan
B)France
C)The U.S.
D)Spain
Q2) What does G3 represent?
A)An annual summit of countries committed to the reduction of GHGs
B)The third type of GHG
C)The United States, Canada and Mexico
D)The third generation of the GRI's Sustainability Reporting Guidelines
Q3) Which of the following are drivers of corporate social reporting?
A)The level of media attention
B)Social pressure groups
C)Environmental pressure groups
D)All of the above
Q4) In August 2010, what was the price per ton of carbon?
A)$1.00
B)$2.50
C)10 cents
D)25 cents
Page 17
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