Accounting for Multinational Enterprises Exam Review
Course Introduction
This course provides an in-depth examination of accounting principles and practices as they apply to multinational enterprises operating in the global business environment. Students will explore the complexities of financial reporting across different countries, including the impact of varying accounting standards such as IFRS and US GAAP, currency translation methods, taxation issues, transfer pricing, and international financial statement analysis. The course also addresses the ethical and regulatory challenges multinational firms face and equips students with the skills needed to interpret and prepare consolidated financial statements for organizations with international operations.
Recommended Textbook
International Accounting 3rd Edition by Timothy Doupnik
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15 Chapters
839 Verified Questions
839 Flashcards
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Page 2
Chapter 1: Introduction to International Accounting
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55 Verified Questions
55 Flashcards
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Sample Questions
Q1) 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
Answer: B
Q2) Which of these European countries does NOT use the Euro as its domestic currency?
A)France
B)United Kingdom
C)Ireland
D)The Netherlands
Answer: B
Q3) In 2008 the country with the largest amount of exports was:
A)the United States of America.
B)China.
C)Japan.
D)Germany.
Answer: D
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Chapter 2: Worldwide Accounting Diversity
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52 Flashcards
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Sample Questions
Q1) 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
Answer: C
Q2) Which country includes a social report in the notes to financial statements?
A)Japan
B)Israel
C)Brazil
D)Germany
Answer: C
Q3) Individualism,power distance,uncertainty avoidance,and masculinity are examples of:
A)accounting values.
B)ecological factors.
C)cultural dimensions.
D)external forces.
Answer: C
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Chapter 3: International Convergence of Financial Reporting
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Sample Questions
Q1) What is Anglo-American Accounting?
A)It is an association of British and American accounting regulatory agencies.
B)The accounting systems used in the U.S.,U.K.,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 above are true.
Answer: B
Q2) Which of the following terms describe the qualitative characteristic of information usefulness?
A)Relevance
B)Understandability
C)Representational faithfulness
D)All of the above are characteristics of information usefulness.
Answer: D
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Chapter 4: International Financial Reporting Standards:
Part I
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Sample Questions
Q1) In what way should operating leases be accounted for under IAS 17?
A)The lease payments should be capitalized and shown on the balance sheet as an asset.
B)The lease payments must be expensed as they are incurred.
C)IAS 17 is flexible,allowing both capitalization and expensing of operating lease costs.
D)The lessee capitalizes the operating lease and the lessor expenses the lease.
Q2) A "bottom up" test and "top down" test must be applied under IASB standards to determine what?
A)impairment of tangible fixed assets
B)impairment of intangible fixed assets
C)impairment of goodwill
D)allocation of overhead costs
Q3) According to IAS 16 (Property,Plant & Equipment),what is the term used to indicate the amount for which an asset could be exchanged between knowledgeable,willing parties in an arm's length transaction?
A)replacement cost
B)net realizable value
C)fair market value
D)historical cost
Page 6
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Chapter 5: International Financial Reporting Standards:
Part II
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Sample Questions
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 1,Presentation of Financial Statements,how must deferred taxes be classified on the balance sheet?
A)as either a current asset or a current liability
B)as always a noncurrent asset or a noncurrent liability
C)as either a current or noncurrent asset or liability based on the expected timing of realization
D)as a separately stated positive or negative component of equity
Q3) Which of the following is NOT a share-based payment transaction under IFRS 2?
A)equity-settled share-based payment
B)cash-settled share-based payment
C)choice-of-settlement share-based payment
D)All of the above are share-based payment transactions under IFRS 2.
Page 7
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Chapter 6: Comparative Accounting
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Sample Questions
Q1) What term should be used to describe the current economic system in the People's Republic of China?
A)Communist
B)Socialist market
C)Totalitarian
D)Free enterprise
Q2) What was the difference between the CICPA and CACPA in the People's Republic of China (PRC)?
A)These are two translations of a single Chinese professional association from Mandarin to English.
B)The CICPA was the professional association for accountants and the CACPA is the professional association for auditors.
C)The CICPA was the professional association for CPAs in private practice and the CACPA is the professional association for accountants in public practice in the PRC.
D)None of the statements above is true.
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Chapter 7: Foreign Currency Transactions and Hedging
Foreign Exchange Risk
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Sample Questions
Q1) Under U.S.GAAP,to qualify for hedge accounting which of the following conditions must be met?
A)There must be formal documentation of the hedging relationship.
B)A derivative must be used specifically to hedge fair value exposure or cash flow exposure.
C)The hedge must be effective.
D)All of the above must be met in order to qualify for hedge accounting.
Q2) Northland Corporation recorded £1,000,000 in Accounts Receivable for sales to customers in the United Kingdom and recorded Accounts Payable of 2,000,000 yuan for product purchased from China. If Northland recorded a foreign currency exchange loss on its receivables and a foreign currency gain on its payables,what must have happened to each currency?
A)Yuan appreciated,Pound depreciated
B)Yuan depreciated,Pound appreciated
C)Yuan appreciated,Pound appreciated
D)Yuan depreciated,Pound depreciated
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Chapter 8: Translation of Foreign Currency Financial Statements
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Sample Questions
Q1) Under IAS 21,which of the following is not a factor in determining functional currency?
A)It is the currency that influences sales prices for goods and services.
B)It is the currency that mainly influences labor,material and other costs of providing goods and services.
C)It is the currency least likely to experience hyperinflation.
D)It is the currency in which funds from financing activities are generated.
Q2) 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 current rate 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.
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10
Chapter 9: Additional Financial Reporting Issues
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Sample Questions
Q1) Which of the following is NOT a characteristic which is indicative of hyperinflation under IAS 29?
A)The cumulative inflation rate over a three-year period is 75% or higher.
B)Interest rates are linked to a price index.
C)The price of credit sales includes a "buffer" to compensate for the expected loss in purchasing power over the credit period.
D)The general population thinks about prices in terms of a stable foreign currency,and prices may actually be quoted in that currency.
Q2) For the purpose of financial reporting under IASB standards,what is a "group?"
A)a parent corporation and all of its subsidiary corporations
B)any multinational corporation under the jurisdiction of the IASB
C)all countries that have adopted IASB standards
D)a company that is comprised of foreign corporations dissolved into one entity
Q3) Under both IFRS and U.S.GAAP,how should an investing entity report nonconsolidated subsidiaries?
A)equity method
B)fair value
C)proportionate consolidation
D)parent concept
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Page 11
Chapter 10: Analysis of Foreign Financial Statements
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Sample Questions
Q1) 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.
Q2) Which of the following statements is true about convenience translations?
A)Translation eliminates the problems associated with comparing financial statements in the same language.
B)Convenience translation means that a company converts both the language and the currency of its financial statements for the convenience of potential investors.
C)Convenience translations require reconciliation to U.S.GAAP,U.S.format,as well as conversion to English.
D)None of the above statements is true.
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Chapter 11: International Taxation
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Sample Questions
Q1) How is a foreign subsidiary different from a foreign branch of a domestic corporation?
A)Subsidiaries always generate more foreign source income than branches do.
B)The subsidiary is a company incorporated in the foreign country,whereas a branch is not a separate corporation.
C)A subsidiary is created to manufacture and distribute products in foreign markets,whereas a branch's only function is sales in the foreign market.
D)The income of a subsidiary is taxable by the country where it is located,but branch income is not subject to tax by the country where it does business.
Q2) What explains the "follow-the-leader" effect of countries changing their corporate tax rates in response to changes made by other countries?
A)Harmonization of accounting standards
B)Competition for foreign investment
C)Currencies pegged to another country's currency
D)None of the above
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13
Chapter 12: International Transfer Pricing
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Q1) 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
Q2) How can the conflict between cost minimization and performance evaluation be overcome in a decentralized organization?
A)dual transfer pricing systems
B)market-based transfer pricing systems
C)cost-based transfer pricing systems
D)negotiated transfer pricing systems
Q3) What power is given to the Internal Revenue Service (IRS)under code section 482?
A)power to eliminate intercompany transactions
B)authority to audit international transfer prices
C)authority to impose tariffs on foreign imports
D)All of the above
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Chapter 13: Strategic Accounting Issues in Multinational Corporations
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Sample Questions
Q1) 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
Q2) What is the advantage of using operating income or EBIT as a measure of performance in a profit center of a multinational corporation?
A)It is much easier to calculate than other measures.
B)It is the only measure available to the senior management of the parent company.
C)It excludes interest and taxes,which are beyond the manager's control.
D)Divisional managers will maximize output if this measure is used for management control.
Q3) Which of the following factors is NOT considered in performing the environmental analysis phase of strategy formulation?
A)competitors
B)government regulations
C)core competencies
D)customer demand
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Chapter 14: Comparative International Auditing and Corporate Governance
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Sample Questions
Q1) In China,who is responsible for regulating auditing practice?
A)Chinese Institute of Certified Public Accountants (CICPA)
B)government,through local audit bureaus
C)Chinese stock exchange
D)Auditing Practices Board (APB)
Q2) According to the International Auditing Practices Committee,financial statements have conformed to International Financial Reporting Standards (IFRS)if:
A)they have complied with at least 75% of the IFRS.
B)they have complied with at least one-half of the provisions of the IFRS.
C)they have complied with all requirements and interpretations of the IFRS.
D)they have complied with most of the IFRS or with U.S.GAAP.
Q3) Which of the following is NOT a factor influencing the probability that an auditor will detect an accounting error?
A)competence of the auditor
B)quality review and monitoring
C)financial reporting requirements
D)independence of the auditor
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Page 16
Chapter 15: International Corporate Social Reporting
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Sample Questions
Q1) Which country is NOT a member of the Asia-Pacific Partnership on Clean Development and Climate?
A)Japan
B)New Zealand
C)India
D)Korea
Q2) The meaning of corporate social reporting (CSR)is derived from the notion of:
A)governmental societal responsibility.
B)organizational societal responsibility.
C)Maslow's hierarchy of needs.
D)the Sarbanes-Oxley Act of 2002.
Q3) ESG is an acronym for:
A)environmentally-specific gases
B)environmental social governance reporting
C)European societal goals
D)ecologically-safe groundwater
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