Comparative Accounting Systems Exam
Bank
Course Introduction
Comparative Accounting Systems explores the differences and similarities in accounting principles, practices, and regulatory environments across various countries and regions. The course examines how cultural, economic, legal, and institutional factors influence the development of accounting systems worldwide. Students will analyze international financial reporting standards, the harmonization and convergence of accounting standards, and the challenges faced by multinational corporations in preparing financial statements. Through case studies and comparative analyses, learners gain a deeper understanding of global accounting diversity and its impact on financial decision-making, transparency, and global business operations.
Recommended Textbook
International Accounting 4th Edition by Timothy Doupnik
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Page 2
Chapter 1: Introduction to International Accounting
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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 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.
Answer: C
Q3) 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 the above
Answer: D
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Chapter 2: Worldwide Accounting Diversity
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Q1) Individualism, power distance, uncertainty avoidance, and masculinity are examples of:
A)accounting values.
B)ecological factors.
C)cultural dimensions.
D)external forces.
Answer: C
Q2) 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)masculinity.
C)individualism.
D)power distance.
Answer: B
Q3) 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
Answer: D
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Chapter 3: International Convergence of Financial Reporting
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Q1) Why did the European Commission stop issuing directives related to accounting in 1990?
A)The EU was leaving the formulation of accounting standards up to the IASC.
B)The European Commission had finished the task of formulating accounting standards for the European Union.
C)Accounting harmonization had been completed.
D)The Commission found that its directives were unenforceable.
Answer: A
Q2) In addition to the International Accounting Standards Committee (IASC), which of the following organizations was considered to be one of the two most important forces in efforts to harmonize accounting standards?
A)U.S.Financial Accounting Standards Board (FASB)
B)United Nations (UN)
C)North Atlantic Treaty Organization (NATO)
D)European Union (EU)
Answer: D
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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) IASB standards address related party transactions.According to these standards, which of the following is considered a "related party?"
A)Parent companies
B)Subsidiary companies
C)Key members of management
D)All of the above could be related parties.
Q3) Assume that subsequent to your adjustment the expected selling price increases to $13,000.(All the rest of the facts are the same.) What adjustment to inventory should be made under IAS 2 after this event?
A)Inventory should be increased (debited) by $3,500.
B)Inventory should be increased (debited) by $4,000.
C)No adjustment should be made to inventory once it is written down.
D)Inventory should be increased (debited) by $1,000.
Page 6
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Chapter 5: International Financial Reporting Standards:
Part II
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Q1) Under U.S.GAAP, a deferred tax asset must be realized when:
A)realization is probable.
B)realization is possible.
C)realization is more likely than not.
D)realization is greater than 75% likely.
Q2) Which of the following statements is true of IAS 19?
A)It establishes guidance for measuring onerous contract.
B)It requires all past service costs to be recognized in net income in a subsequent period in which the benefit plan is changed.
C)Its revised version became effective in the year 2013.
D)It covers all employee benefits including share-based compensation.
Q3) Under IAS 37, inflows of resources that are "virtually certain" to be received should be:
A)disclosed as contingent assets in the notes to the financial statements.
B)recognized as assets.
C)undisclosed until management is absolutely certain that resources will be received.
D)reported only in the cash flow statement.
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Chapter 6: Comparative Accounting
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Q1) What entity is primarily responsible for setting accounting and financial reporting standards in Mexico?
A)Mexican Institute of Public Accountants (MIPA)
B)National Banking and Securities Commission (NBSC)
C)Bolsa Mexicana de Valores (BMV)
D)International Accounting Standards Board
Q2) Which of the following represents the difference between UK GAAP and IFRS with respect to proposed dividends?
A)Under UK GAAP, proposed dividends should not be recognized as a liability at the balance sheet date, whereas IFRS mandates proposed dividends to be accrued as a liability.
B)UK GAAP has provided no guidance on this issue, whereas IFRS prohibits the recognition of proposed dividends as accrued liability.
C)Under UK GAAP, proposed dividends should be accrued as a liability, whereas under IFRS, it should not be recognized as a liability at the balance sheet date.
D)IFRS has no specific guidance regarding the treatment of proposed dividends, whereas UK GAAP mandates proposed dividends to be recognized as accrued liability.
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Page 8
Chapter 7: Foreign Currency Transactions and Hedging
Foreign Exchange Risk
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Q1) What is the requirement for reporting derivatives under international accounting standards and U.S.GAAP?
A)They may be shown on the balance sheet or they may be treated as off-balance sheet investments.
B)They must be shown on the balance sheet at fair value.
C)They must be shown on the balance sheet at historical cost.
D)They may be shown on the balance sheet at historical cost or at net realizable value.
Q2) Under U.S.GAAP, what method is required to account for foreign currency transactions?
A)A one-transaction perspective must be used.
B)The two-transaction perspective must be used.
C)A sale is not recorded until payment is received and converted to U.S.dollars.
D)A sale is not recorded until payment is received in the foreign currency.
Q3) What is a "foreign exchange rate?"
A)The price to buy a foreign currency
B)The price to buy foreign goods
C)The difference between the price of goods in a foreign currency and the price in a domestic currency
D)The cost to hold all monetary assets in a single currency
Page 9
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Chapter 8: Translation of Foreign Currency Financial Statements
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Q1) When would the balance sheet exposure arising from the current rate method become realized?
A)It is realized once the financial statements of the foreign operation and the parent are consolidated.
B)It is realized any time the historical exchange rate is different from the spot rate at the balance sheet date.
C)It is realized when the foreign operation is sold at book value and the proceeds are converted into parent company currency.
D)It can never be realized because it is only the result of the choice of accounting methods and does not reflect real exposure.
Q2) Under the temporal method of translating foreign currency financial statements, what exchange rate should be used for cost of goods sold?
A)Spot rate at the end of the year
B)Average rate during the year
C)Spot rate mid-year
D)There is no single rate that can be used for this purpose
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10
Chapter 9: Additional Financial Reporting Issues
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Q1) Under IFRS 3, which concept must be used to report the assets and liabilities of an acquired company on the parent company financial statements?
A)Parent company concept
B)Equity concept
C)Entity concept
D)Historical cost concept
Q2) Which of the following statements is true about pooling of interests method of accounting for business combinations?
A)The pooling of interests method is no longer acceptable under IFRS.
B)Goodwill arises only when the pooling of interests method is used for business combinations.
C)Pooling of interests is used for international consolidations but never for domestic consolidations.
D)The purchase method is used only when less than 100% of an entity's voting shares are acquired.
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11
Chapter 10: Analysis of Foreign Financial Statements
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Q1) What is an advantage of using ratio analysis in comparing financial statements from different countries?
A)Ratios are expressed as percentages, making currency differences irrelevant to the analysis.
B)Ratios highlight the holding gains or losses related to currency translation.
C)Purchasing power gains and losses from currency translation show up clearly in ratio analysis.
D)Comparing business ratios across countries removes the effect of economic conditions and business culture.
Q2) 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.
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Chapter 11: International Taxation
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Q1) The nine categories of foreign source income defined by the Tax Reform Act of 1986 are referred to as:
A)FTC rates.
B)FTC credits.
C)FTC baskets.
D)FTC brackets.
Q2) Under U.S.tax law, what is the relationship between foreign tax credits and the different categories of foreign source income?
A)FTC from one category can offset taxes owed on other categories.
B)Excess FTC from one category can be carried forward to offset future U.S.taxes payable on another category.
C)Excess FTC from one category can be carried back to offset U.S.taxes paid on another category in the prior year.
D)None of the above
Q3) What is the optimal tax objective for multinational corporations?
A)Minimize domestic taxes paid on worldwide income
B)Minimize worldwide taxes paid, within the limitations of applicable tax law
C)Minimize the credit for worldwide taxes paid
D)Minimize foreign taxes
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Page 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) Withholding taxes on dividends paid by a foreign subsidiary to a parent can be reduced by:
A)raising prices paid by the parent for goods it acquires from the subsidiary.
B)raising prices paid by the subsidiary for goods it acquires from the parent.
C)negotiated transfer pricing.
D)reducing prices charged by the parent for good transferred to the subsidiary.
Q3) 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.
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Chapter 13: Strategic Accounting Issues in Multinational Corporations
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Q1) When a unit of a multinational corporation creates knowledge in specific areas that can be used by other units within the organization, that unit is called a(n):
A)implementer.
B)global innovator.
C)local innovator.
D)integrated player.
Q2) What result can be expected if a management control system encourages managers to focus on inappropriate measures?
A)Managers will work extra hard to achieve the targets set in terms of those measures.
B)Managers will engage in dysfunctional behaviors.
C)Profits will go up for the foreign operation and for the corporation as a whole.
D)None of the above
Q3) Which of the following is a non-financial measure of performance?
A)Return on investment
B)Market share
C)Earnings per share
D)Return on equity
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Page 15
Chapter 14: Comparative International Auditing and Corporate Governance
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Q1) Under the Sarbanes-Oxley Act of 2002, who is responsible for paying the independent auditor?
A)Management
B)Audit committee
C)Government who has jurisdiction over the corporation
D)American Institute of Certified Public Accountants (AICPA)
Q2) According to international auditing standards, if audit work has been limited in its scope, the auditors have had a disagreement with management, or there is significant uncertainty associated with the financial statements, what kind of audit opinion should be rendered?
A)Disclaimer of opinion
B)Unqualified
C)Adverse
D)Qualified
Q3) In Germany, who do external auditors consider as their clients?
A)The government
B)Board of directors
C)Society as a whole
D)All of the above
Page 16
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Chapter 15: International Corporate Social Reporting
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Q1) How do Australian managers tend to view the annual corporate social report?
A)It is required by Australian statute and is not an option.
B)It has been greeted with skepticism.
C)It is doomed to fail as a legitimating vehicle.
D)It is useful in maintaining or reestablishing legitimacy.
Q2) What does EU ETS stand for?
A)European Union Emissions Trading Scheme
B)European Union Emissions and Toxic Sludge
C)Eastern European Emergency Toxic Standards
D)Eastern European Electricity Transmission Standards
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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