Accounting for Multinational Corporations
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Course Introduction
This course explores the principles and practices of accounting in a global context, focusing on multinational corporations (MNCs). Students will examine the challenges and complexities of financial reporting, consolidation, and performance evaluation for operations spanning multiple countries. Topics include foreign currency translation, international accounting standards (such as IFRS and US GAAP), taxation issues, transfer pricing, and ethical considerations in global financial management. The course also discusses how political, economic, and cultural environments impact accounting decisions and the strategies MNCs use to address these challenges.
Recommended Textbook
International Accounting and Multinational Enterprises 6th Edition by Lee H. Radebaugh
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16 Chapters
693 Verified Questions
693 Flashcards
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Page 2
Chapter 1: International Accounting and International Business
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37 Verified Questions
37 Flashcards
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Sample Questions
Q1) The International Accounting Standards Board, an international organization dedicated to the diversity of accounting standards worldwide.
A)True
B)False
Answer: False
Q2) One trend in European securities markets is consolidation.
A)True
B)False Answer: True
Q3) Which of the following is a true statement concerning MNEs?
A) Developing country MNEs tend to come from the industrial sector rather than the services and utilities sectors
B) There are no MNEs from developing countries due to small market size.
C) Top developing country MNEs tend to come from Eastern Europe.
D) Latin American and Asian MNEs are the most significant of the emerging market companies.
Answer: D
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Page 3
Chapter 2: International Accounting Patterns, Culture and Development
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42 Flashcards
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Sample Questions
Q1) The Mueller system of classifying countries for accounting purposes based on their business and economic environments is an example of
A) deductive classification.
B) inductive classification.
C) the inability to classify countries for accounting similarities.
D) cultural relativism.
Answer: A
Q2) Individualism is more compatible with which accounting value?
A) statutory control.
B) uniformity.
C) flexibility.
D) collectivism.
Answer: C
Q3) Conversatism can be linked most closely with collectivism.
A)True
B)False
Answer: False
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Page 4
Chapter 3: Comparative International Financial Accounting
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35 Verified Questions
35 Flashcards
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Sample Questions
Q1) Company law in the Netherlands
A) is based upon English common law.
B) ignores social accounting reporting.
C) was originally based upon the Roman law system
D) follows tax law.
Answer: C
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
Q3) The Netherlands is famous for its business economics approach to accounting.
A)True
B)False
Answer: True
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Chapter 4: Comparative International Financial Accounting
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Sample Questions
Q1) Which country implemented a shock therapy approach to a market-oriented economy?
A) Thailand
B) China
C) Italy
D) Poland
Q2) Many of Russia's soviet-style production units continue to exist with losses.
A)True
B)False
Q3) Poland made a transition to a market-oriented economy using a shock therapy treatment.
A)True
B)False
Q4) Which of the following pair of countries has similar accounting systems?
A) Japan and Australia
B) India and Malaysia
C) Sweden and Czech Republic
D) Russia and Germany
Q5) Chinese government controls the accounting regulation and auditing.
A)True
B)False Page 6
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Page 7
Chapter 5: International Financial Statement Analysis
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35 Flashcards
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Sample Questions
Q1) In similar economic environments or situations
A) accounting diversity is logical
B) accounting diversity is illogical and leads to noncomparable results
C) results may or may not be comparable
D) accounting treatment does not matter
Q2) In attempting to value a foreign corporation, there is a tendency
A) not to restate the financial statements
B) to use the London exchange market values
C) to be conservative
D) to look at earnings from a home country perspective
Q3) The most popular exchange to be listed on is:
A) Nasdaq
B) New York
C) Euronext
D) London
Q4) Japanese PE ratios have been reported as relatively high because their earnings have been understated.
A)True
B)False
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Chapter 6: International Transparency and Disclosure
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Sample Questions
Q1) In terms of Research and Development (R&D) and capital investments,
A) few firms disclose R&D information.
B) Germany, Japan, the Netherlands, Switzerland, and U.K. all exhibit higher levels of disclosure in both R&D and investment programs than most other countries.
C) all firms are required by the U.N. to disclose their capital investment program, and compliance is quite high.
D) it is very common for companies to disclose their investment program by geographical area.
Q2) The EU 4th and 7th Directives require
A) the quantification of a forecast of earnings.
B) the discussion of R&D analyzed by product.
C) an indication of important events since the end of the year and any likely future development.
D) any environmental measures taken.
Q3) The increased supply of financial information by MNEs appears to have
A) satisfied labor unions but not governments.
B) resulted in more precise disclosure requirements by governments.
C) resulted in the demand for additional information.
D) resulted in a greater simplification in financial statements.
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Page 9
Chapter 7: International Accounting Standards and Global Convergence
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37 Flashcards
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Sample Questions
Q1) Which of the following is true concerning the impact of the United Nations on accounting?
A) The U.N. generally represents the wishes of industrial countries.
B) It has been more effective at monitoring accounting practices than at setting accounting standards.
C) It has not been able to establish guidelines for accounting practices due to internal disagreements.
D) It has been interested in nonfinancial rather than financial disclosures.
Q2) Disclosure levels vary across the world's stock markets but
A) disclosure in the U.S. is among the lowest.
B) disclosure levels in the U.K. ranks among the highest.
C) Swiss disclosure levels are the highest in the world.
D) German disclosure levels are comparable with the U.S.
Q3) According to the 4th Directive of the EU, the operational basis for the income statement means that
A) a horizontal format must be used.
B) there is a separate line item for staff costs.
C) depreciation is considered a liability.
D) cost of goods sold is presented as a line item.
Page 10
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Chapter 8: International Business Combinations, Goodwill and Intangibles
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60 Flashcards
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Sample Questions
Q1) A problem with joint-venture accounting
A) includes an emphasis on a receipts and payments approach
B) includes an emphasis on an accruals approach
C) is the lack disclosure on contingencies
D) is the lack of a definition of what constitutes a joint venture
Q2) Group identification is a problem for international consolidation.
A)True
B)False
Q3) DLT, a German firm, acquired a foreign corporation for a purchase price of $500 million. The book value of the net assets was stated at $350 million, but the fair market value of the net assets is $420 million. Assume the useful life of the goodwill to be 10 years. If the goodwill is systematically amortized over its useful life, what would be the amount per year?
A) $15 million per year
B) $8 million per year
C) $7 million per year
D) Goodwill cannot be systematically amortized in Germany.
Q4) Current international accounting standards permits the amortization of goodwill. A)True B)False
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Chapter 9: International Segment Reporting
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Sample Questions
Q1) According to U.S. and British companies, narrowly-defined line of business and geographic segments are
A) a cost of preparation but not a cost of competitive disadvantage.
B) difficult to determine because of their highly aggregated organizational structures.
C) easy to determine, because they only have to report sales data.
D) a competitive disadvantage cost since not everyone in the world has to account for segments the same way.
Q2) According to predictive ability tests of segment reports,
A) it has clearly been proven that users use disaggregated information to make forecasts.
B) forecasts based on line of business data are not as accurate as those based on geographic segments.
C) forecasts based on segment earnings are more accurate than those based on segment sales.
D) segment information is not useful for small firms.
Q3) Excessive costs of segmental disclosure has doubtful validity.
A)True
B)False
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Chapter 10: Foreign Currency Transactions and Translation
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Sample Questions
Q1) According to the current-rate method of translating foreign currency financial statements,
A) current assets and liabilities are translated at current exchange rates, and other assets, liabilities and owner's equity are translated at historical exchange rates.
B) only those assets carried at past exchange prices should be translated at the historical rate.
C) only owner's equity is translated at historical exchange rates.
D) translation losses are taken to income, but translation gains are deferred.
Q2) The currency of the country where the foreign company is operating is the A) base currency.
B) parent currency.
C) local currency.
D) third country currency.
Q3) IAS 21 and SFAS 52 are similar.
A)True
B)False
Q4) The current rate method would most likely have a translation adjustment.
A)True
B)False
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Chapter 11: International Accounting for Price Changes
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Sample Questions
Q1) General purchasing power accounting
A) is required for U.S. companies if the inflation rate exceeds 10 percent three years in a row.
B) is designed to report accounts in units of the same purchasing power.
C) assumes that the general level of inflation is irrelevant.
D) is not permitted in British accounting.
Q2) Professor Limperg believed
I..internal management decision-makers should use current value information
II..external investor decision-makers should use current value information
A) only I
B) only II
C) I and II
D) neither I or II
Q3) FASB
A) is the only standard setting body actively working to introduce general purchasing power accounting
B) is working with the IASB working to introduce general purchasing power accounting
C) is not considering a standard for general purchasing power accounting.
D) is in favor of a reserve account for inflation.
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Page 14
Chapter 12: Corporate Governance and Control of Global Operations
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Sample Questions
Q1) Research on international firms shows a lack of association between the proportion of outside directors and firm performance.
A)True
B)False
Q2) Which of the following reflects information flows of a global innovator?
A) High outflow of knowledge from the local subsidiary to the rest of the corporation and high inflow of knowledge from the rest of the corporation to the local subsidiary.
B) High outflows and low inflows.
C) Low outflows and high inflows.
D) High outflows and high inflows.
Q3) The use of external experts is common in the international division structure.
A)True
B)False
Q4) A strategy where corporate assets are dispersed, interdependent and specialized is symbolic of a
A) multidomestic strategy.
B) global strategy.
C) transnational strategy.
D) geocentric strategy.
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Chapter 13: Foreign Exchange Risk Management
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Sample Questions
Q1) Which of the following is not a criterion that must exist for hedge accounting to function:
A) Item to be hedge exposes the enterprise to price, currency, or interest rate risk.
B) The hedge position reduces the exposure.
C) The hedge position is designated as a hedge.
D) The enterprise would suffer a loss in the absence of the hedge.
Q2) If a U.S exporter were to receive payment in U.S. dollars from a British importer
A) there is a transaction exposure
B) there is an economic exposure
C) there is no exposure
D) there is a translation exposure
Q3) A transaction exposure risk can be eliminated with a
A) call option
B) put option
C) forward
D) bank deposit in the foreign country
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Page 16
Chapter 14: International Budgeting and Performance Evaluation
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Sample Questions
Q1) Based on survey information, Anglo-American managers prefer A) not to use ROI performance evaluation systems for foreign operations.
B) shorter term but more quantitative objectives.
C) home currency for transfer pricing .
D) their companies not use local currency information for performance evaluation.
Q2) The concept of the value of participation in budgeting may be uniquely Anglo-American.
A)True
B)False
Q3) The right objectives should be based on I..analysis of the competition II..strengths of the firm
A) only I
B) only II
C) either I or II
D) I and II
Q4) For U.S. MNEs, ROI is one of the most often used measures of performance. A)True B)False
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Chapter 15: International Auditing Issues
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Sample Questions
Q1) Sarbanes-Oxley prohibits all of the following services to audit clients except A) tax
B) bookkeeping
C) financial information systems design
D) internal audit outsourcing
Q2) Distance is not a problem with international auditing. False
A)True
B)False
Q3) The IFAC is
A) an organization of national professional accountancy organizations
B) part of the OECD
C) under control of FASB
D) part of the UN
Q4) Companies that switch from small or medium audit firms to more international auditors often give the reason of
A) the need to have one firm auditing all companies within one group
B) better brand recognition
C) superior low balling
D) side payments
Page 18
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Chapter 16: International Taxation Issues
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Sample Questions
Q1) On January 1, Multicorp, a U.S. firm, sells £200,000 of merchandise on account to an importer in Britain with payment due on February 15. The relevant exchange rates are as follows:
January 1 $1.6260
January 31 $1.5995
February 15 $1.5900
February 28 $1.5855
What would be the gain or loss for U.S. tax purposes on February 15?
A) No gain or loss would be recognized.
B) $5,300 loss
C) $7,200 loss
D) $1,900 loss
Q2) For U.S. companies, why is it an advantage to have a foreign branch in the early years of a foreign enterprise.
A) Branch remittances are subject o withholding taxes.
B) Losses can offset home office income for tax purposes.
C) Earnings distributed to the home office are translated at the exchange rate in effect at year end.
D) Profits are subject to CFC rules.
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Page 19