Accounting for Multinational Enterprises Question Bank
Course Introduction
Accounting for Multinational Enterprises explores the unique accounting challenges faced by organizations operating across international borders. This course examines differences in financial reporting standards, tax regulations, and currency translation methods encountered in global business environments. Students will learn how to consolidate financial statements of multinational entities, manage risks associated with exchange rates, and address ethical considerations in diverse regulatory environments. Emphasis is placed on International Financial Reporting Standards (IFRS), U.S. Generally Accepted Accounting Principles (GAAP), and the impact of global financial markets on accounting practices, equipping students with essential skills to support informed decision-making in multinational firms.
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International Accounting 4th Edition by Timothy Doupnik
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Page 2
Chapter 1: Introduction to International Accounting
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Q1) 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 foreign country.
Answer: D
Q2) 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.
Answer: B
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Chapter 2: Worldwide Accounting Diversity
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Q1) 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.
Answer: B
Q2) 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
Answer: D
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Chapter 3: International Convergence of Financial Reporting
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Q1) Which of the following statements is NOT a way in which a country might adopt IFRS?
A)By requiring all companies in that country to adopt IFRS.
B)By permitting foreign companies listed on domestic exchanges to adopt IFRS.
C)By force of IASB to adopt of IFRS.
D)By requiring domestic companies that list on foreign exchanges to adopt IFRS.
Answer: C
Q2) What is the official language of the IASB?
A)English
B)French
C)Spanish
D)German
Answer: A
Q3) De facto harmonization refers to the process of:
A)making accounting practices consistent across countries.
B)making accounting regulations consistent internationally.
C)resolving accounting differences through litigation.
D)creating one set of accounting standards.
Answer: A
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Chapter 4: International Financial Reporting Standards:
Part I
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Q1) Under IAS 38, which of the following items might qualify for capitalization as internally generated intangible assets?
A)Brands
B)Publishing titles
C)Market share
D)Customer lists
Q2) Which of the following is generally true about the differences between U.S.GAAP and IFRS?
A)U.S.GAAP is more flexible than IFRS.
B)U.S.GAAP tends to be more rules-based and IFRS tend to be principles-based.
C)More professional judgment is required to apply U.S.GAAP than is required for implementing IFRS.
D)In all cases, U.S.GAAP is more detailed than the IFRS.
Q3) 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.
Page 6
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Chapter 5: International Financial Reporting Standards:
Part II
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Q1) What is the journal entry required to recognize a deferred tax asset of $50,000?
A)Dr.Deferred Tax Asset $50,000, Cr.Income Tax Benefit $50,000
B)Dr.Deferred Tax Asset $50,000, Cr.Equity $50,000
C)Dr.Income Tax Expense $50,000, Cr.Deferred Tax Asset $50,000
D)Dr.Deferred Tax Asset $50,000, Cr.Deferred Tax Liability $50,000
Q2) Calculate the past service costs included in 2013 net pension expense (or revenue) under IAS 19.
A)$5,100
B)$5,400
C)$600
D)$7,000
Q3) Under IAS 18, which of the following is NOT a condition that must be met in order for revenue from the sale of goods to be recognized?
A)The significant risks and rewards of ownership of the goods have been transferred to the buyer.
B)There must be a binding, written contract between the seller and the buyer.
C)The amount of revenue can be measured reliably.
D)Neither continued managerial involvement normally associated with ownership nor effective control of the goods is retained.
Page 7
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Chapter 6: Comparative Accounting
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Q1) How does the cultural value of collectivism explain the status of auditors in Japanese society?
A)Collectivism places great importance on individual responsibility, giving auditors a high status in Japanese society.
B)Since outsiders are not trusted in the Japanese culture, independent auditors in Japan do not enjoy the status of American auditors.
C)As individual achievement is a hallmark of collectivism, auditors are commonly found at the top of Japanese corporations.
D)Collectivism values the ability of individuals to collect resources for themselves, so auditors who achieve distinction in their profession are highly regarded.
Q2) German accounting standards have a "reverse authoritative principle." What does this mean?
A)Reversing entries must be made before financial reports can be issued to the public.
B)Only tax deductible expenses can be used for determining accounting income.
C)Financial statements are the basis for taxation.
D)None of the above
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Chapter 7: Foreign Currency Transactions and Hedging
Foreign Exchange Risk
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Q1) Which of the following statements is true of the relationship between foreign currency transactions, exchange rate changes, and foreign exchange gains and losses?
A)In an export sales, depreciation of the foreign currency causes a foreign exchange gain.
B)In an import purchase, appreciation of the foreign currency causes a foreign exchange gain.
C)In an import purchase, depreciation of the foreign currency causes a foreign exchange loss.
D)In an export sales, appreciation of the foreign currency causes a foreign exchange gain.
Q2) Which of the following statements is true about the Euro?
A)It is the currency used by all countries in the European Union.
B)It is pegged to the U.S.dollar.
C)It is the currency required to be used in financial reporting under international accounting standards.
D)None of the statements above is true.
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Chapter 8: Translation of Foreign Currency Financial Statements
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Q1) How does FASB ASC 830, Foreign Currency Matters define a "highly inflationary economy?"
A)Inflation rate over 50% annually
B)Inflation rate over 10% annually
C)Cumulative three-year inflation over 26%
D)Cumulative three-year inflation over 100%
Q2) What is the cause of balance sheet exposure?
A)Converting subsidiary account balances to balances denominated in the parent company's currency at historical exchange rates
B)Completing international transactions in currency other than the currency of the home company
C)Translating subsidiary account balances to amounts denominated in the parent company's currency
D)None of the above
Q3) Which of the following is a nonderivative hedging instrument?
A)Forward contract on foreign currency
B)Foreign currency call option
C)Foreign currency borrowing
D)Foreign currency put option
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Chapter 9: Additional Financial Reporting Issues
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Q1) With regard to convergence of accounting for business combinations between IFRS and U.S.GAAP, the major changes to U.S.GAAP include:
A)classifying noncontrolling interests as assets.
B)use of acquisition method for business combination.
C)recognizing in-process research and development costs as expense.
D)recognizing incurred research costs as liabilities.
Q2) According to IAS 27, how can effective control be achieved without owning more than 50% of another company's voting shares?
A)Representation on the company's board of directors
B)Being the primary entity exercising voting rights
C)Through a contract between the entities
D)All of the above may result in control by one corporation over another.
Q3) Which method of accounting for changing prices (inflation) updates assets by applying inflation rates to historical costs?
A)Current replacement cost method
B)Current rate method
C)Temporal method
D)General purchasing power method
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Chapter 10: Analysis of Foreign Financial Statements
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Q1) As one of the sources of accounting distortions, the intentional overstatement of an accrued restructuring charge is often referred to as a practice of:
A)earnings management.
B)capital adjustment.
C)asset management.
D)risk management.
Q2) What is OIBD?
A)This is the Organization of International Boards of Directors, which is attempting to harmonize accounting standards.
B)It stands for "operating income before depreciation," which some analysts recommend to remove the effect of international accounting standard diversity.
C)It is the Organization of International Bond Dealers, whose financial analysts developed EBITDA.
D)None of the above
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Chapter 11: International Taxation
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Q1) To determine U.S.taxable income, foreign branch net income is grossed up by:
A)adding taxes paid to the foreign government translated at the exchange rate at the end of the year.
B)deducting taxes paid to the domestic government translated at the exchange rate at the date of payment.
C)adding taxes paid to the foreign government translated at the exchange rate at the date of payment.
D)deducting taxes paid to the foreign government translated at the exchange rate at the date of payment.
Q2) What term is used for the characteristic of a tax system whereby a company's decisions to invest domestically or abroad is not affected by taxation?
A)Foreign tax credit
B)Unbiased
C)Capital export neutrality
D)Capital investment irrelevance
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Chapter 12: International Transfer Pricing
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Q1) According to (Internal Revenue Service) IRS code Section 482, what is the standard used by the IRS for international transfer pricing?
A)Cost-based prices
B)Discretionary prices
C)Negotiated prices
D)Arm's-length prices
Q2) According to the Internal Revenue Service, the most reliable measure of an arm's-length prices for sales of tangible property in intercompany transactions is:
A)cost-plus method.
B)comparable profits method.
C)comparable uncontrolled price method.
D)resale price method.
Q3) The monetary amount used to record intercompany transactions is called:
A)exchange rate.
B)transfer price.
C)conversion rate.
D)incremental cost.
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Chapter 13: Strategic Accounting Issues in Multinational Corporations
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Q1) Cash flows related to a proposed capital investment project are subject to what kind of risk?
A)Economic risk
B)Financial risk
C)Political risk
D)All of the above
Q2) The Squeaky Division of Household Products Corporation showed a net loss of £5,000,000 last year, but Squeaky's manager received a bonus for outstanding performance.Why would Household Products' management control system appropriately allow for this apparent inconsistency?
A)Economic factors outside the manager's control caused the loss.
B)Household Products' management control system is ineffective.
C)The bonus represents a payoff to Squeaky's manager to keep her quiet about the loss.
D)The loss was due to controllable factors.
Q3) Which of the following calculations will yield return on investment (ROI)?
A)Annual net income/book value of investment
B)Average annual net income/book value of investment
C)Average annual net income/present value of investment
D)Book value of investment/annual net income
Page 15
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Chapter 14: Comparative International Auditing and Corporate Governance
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Q1) What impact did the Asian financial crisis in the late 1990s and the corporate scandals in the United States in this century have on the auditing profession?
A)Regulation of the external auditing profession was reduced.
B)CPAs were no longer allowed to provide external audit services for multinational corporations.
C)Reputation for being the watchdogs of financial reporting integrity was reduced.
D)External auditors were required to sit on the boards of directors of multinational corporations.
Q2) In multinational corporations, to whom are the external auditors responsible according to OECD guidelines?
A)Corporate management
B)Shareholders
C)Government of the host country
D)Creditors
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Chapter 15: International Corporate Social Reporting
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Q1) What are GHGs?
A)Governmental heating guides
B)Governmental hierarchy of gases
C)Greenhouse gases
D)Good health guides
Q2) What are the most disclosed social report items in Thai corporate annual reports?
A)Employee information and environmental information
B)Thailand tends not to issue corporate social reports
C)Amount of carbon credits traded
D)Community involvement
Q3) What was a key finding of the 2007 Stern Report in the United Kingdom on the Economics of Climate Change?
A)The costs of extreme weather over the next few decades could reach 0.5% to 1% of world GDP per annum.
B)Climate change should promote forced savings over the next few decades.
C)Climate change bears little, if any correlation to economic disruption.
D)The costs of extreme weather over the next few decades could reach 10% to 15% of world GDP per annum.
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