Financial Statement Analysis
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Course Introduction
Financial Statement Analysis is a comprehensive course designed to equip students with the tools and techniques needed to interpret and assess the financial health of businesses. Through an exploration of key accounting principles, students learn to analyze balance sheets, income statements, and cash flow statements. The course emphasizes interpreting financial ratios, trend analysis, and benchmarking, enabling students to make informed judgments about a company's performance and prospects. Case studies and real-world scenarios provide practical application, preparing students to evaluate financial statements for purposes such as investment, lending, and management decision-making.
Recommended Textbook
International Accounting 3rd Edition by Timothy Doupnik
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Page 2
Chapter 1: Introduction to International Accounting
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Sample Questions
Q1) Which of the following is an advantage of having a single set of accounting standards used worldwide?
A)Reduce the accounting costs for multinational corporations
B)Increase the power of the FASB
C)Reduce the number of multinational corporations on the NYSE
D)Increase the diversity of accounting methods used by multinational corporations
Answer: A
Q2) In terms of multinational corporation international trade and investment,the United States,Japan,and the European Union are referred to together as:
A)the G8.
B)the Commonwealth
C)the triad.
D)the OECD.
Answer: C
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3
Chapter 2: Worldwide Accounting Diversity
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Q1) In some countries,financial institutions operate under Shariah,which also gives guidance about accounting practice in these institutions. What is "Shariah?"
A)Shariah is the financial accounting standards board in Saudi Arabia.
B)Shariah is the law governing human conduct that is derived from the Koran.
C)Shariah is the codification of banking regulations in the European Union.
D)Shariah is a political system used in South American countries.
Answer: B
Q2) In the United States,conformity between financial statement presentation and tax treatment is required only for:
A)goodwill.
B)depreciation.
C)gains or losses on securities.
D)the use of the LIFO inventory cost flow assumption.
Answer: D
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4
Chapter 3: International Convergence of Financial Reporting
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Sample Questions
Q1) The IASB's Framework for Preparation and Presentation of Financial Statements (1989)implies that the most important group of users is:
A)government.
B)general public.
C)creditors.
D)investors.
Answer: D
Q2) According to the Framework for Preparation and Presentation of Financial Statements of the IASB,what is the definition of income?
A)Assets minus liabilities
B)Revenue minus expenses
C)Increase in equity (other than from contributions by owners)
D)Inflow of resources with future economic benefit
Answer: C
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Chapter 4: International Financial Reporting Standards:
Part I
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Q1) How does the definition of asset impairment differ between IAS 36 and U.S.GAAP?
A)U)S.GAAP does not consider selling price in determining impairment,but IAS 36 does.
B)U)S.GAAP considers cash flows in assessing value of continued use,but does not discount them,whereas IAS 36 requires discounting in assessing asset impairment.
C)Asset impairment is more likely to occur under IAS 36 than under U.S.GAAP.
D)All of the above are differences between IAS 36 and U.S.GAAP.
Q2) How does IAS 34 (Interim Financial Reporting)differ from U.S.GAAP?
A)U)S.GAAP has no guidance for interim financial reporting.
B)U)S.GAAP takes the position that interim periods are an integral part of the full year.
C)U)S.GAAP is the same as IAS 34.
D)U)S.GAAP requires that an interim period be projected pro rata for the entire year.
Q3) Under IAS 2,what should the Balance Sheet report for Inventory?
A)$9,000
B)$8,500
C)$9,500
D)$10,000
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6
Chapter 5: International Financial Reporting Standards:
Part II
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Q1) Under IAS 36,Income Taxes,which of the following issues are covered?
A)temporary differences
B)operating loss carry-forwards
C)tax credit carry-forwards
D)all of the above
Q2) 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.
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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Sample Questions
Q1) The population of Japan is about 1/3 the population of the United States. There are approximately 250,000 CPAs in the U.S. What is the approximate number of CPAs in Japan?
A)250,000
B)100,000
C)85,000
D)15,000
Q2) What is the primary role of the Financial Reporting Council in the United Kingdom?
A)Compliance oversight
B)Setting standards for accounting practice
C)Policy over the accounting standard setting process
D)All of the above
Q3) Accounting in Mexico is oriented towards fairness,not:
A)Professional judgment
B)Legal compliance
C)Correctness.
D)Taxable income.
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Chapter 7: Foreign Currency Transactions and Hedging
Foreign Exchange Risk
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Q1) What term is used to describe the circumstances under which Amazing Corporation is entering the forward contract?
A)hedge of an unrecognized foreign currency firm commitment
B)hedge of a recognized foreign-currency-denominated asset
C)hedge of a forecast foreign-currency-denominated transaction
D)hedge of net investment in foreign operations
Q2) King's Bank,a British company,purchases market research services from Harris Interactive,a U.S.company,for a contract price to be paid in U.S.dollars when the report is delivered three months later.How would King's Bank like to see the exchange rate move,assuming it isn't hedging the transaction.
A)It hopes that the U.S.dollar appreciates in value against the British pound.
B)It hopes that the British pound appreciates in value against the U.S.dollar.
C)It makes no difference,since they are the customer and the sale takes place in the U.K.
D)It hopes that there is no change between the spot rate and the forward rate.
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Chapter 8: Translation of Foreign Currency Financial Statements
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Q1) 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 temporal 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
Q2) What is another term for "balance sheet exposure?"
A)transaction exposure
B)exchange exposure
C)translation exposure
D)negative exposure
Q3) Which of the following actions could a company use to hedge balance sheet exposure?
A)forward contract on foreign currency
B)foreign currency option
C)foreign currency borrowing
D)All of the above may be used to hedge balance sheet exposure.
Page 10
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Chapter 9: Additional Financial Reporting Issues
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Q1) How must Goodwill resulting from business combinations be treated under U.S.GAAP?
A)It must be amortized over a period of no more than 40 years.
B)It must be expensed when it is acquired.
C)It must be written down when its fair value is less than its carrying value.
D)It must be written down in no less than 5 years and no more than 40 years.
Q2) According to both IFRS 8 and U.S.GAAP,which of the following information should be disclosed for each separate reportable operating segment?
A)the factors used to identify operating segments
B)total liabilities for each operating segment
C)total compensation expense for each operating segment
D)total rent expense for each operating segment
Q3) Under ARB 51,"controlling financial interest "is:
A)not defined.
B)defined as 50% ownership of another entity's voting shares.
C)the direct or indirect ability to make decisions about another entity's activities.
D)the right to receive the expected residual returns of another entity if they occur.
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Chapter 10: Analysis of Foreign Financial Statements
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Q1) Which of the following is a limitation of using commercial databases to access foreign company financial statements?
A)Data may be lost when a standard financial statement format is imposed on foreign statements.
B)Errors may occur during data entry.
C)Notes to the financial statements may not be included,or only partially included.
D)All of the above are limitations.
Q2) Which of the following is a reason for analyzing the financial statements of foreign corporations?
A)making credit decisions about foreign customers
B)evaluating international business combinations
C)diversifying an investment portfolio
D)All of the above are reasons for analyzing foreign financial statements.
Q3) Footnote disclosures in foreign financial statements are particularly helpful in:
A)overcoming differences in statement format among countries.
B)reconciling statements from one country's GAAP to another country's GAAP.
C)learning relevant information not required to be presented in the accounts.
D)all of the above
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Chapter 11: International Taxation
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Q1) Which of the following affect the effective corporate tax rate?
A)tax-based incentives
B)local corporate tax rate
C)method of determining taxable income
D)all of the above
Q2) What is a primary difference between the OECD and UN model tax treaties?
A)The model espoused by the UN assumes all countries are equals,whereas the OECD model does not.
B)The model treaty advocated by the UN grants more taxing rights to the host country than does the OECD model when income repatriation is out of developing countries.
C)The model treaty of the UN gives more taxing rights to well-developed countries than developing countries.
D)All of the above are differences between the OECD and UN models.
Q3) What causes double taxation?
A)a taxpayer being subject to tax laws in multiple jurisdictions
B)profits increasing excessively from year to year
C)penalties imposed by a taxing authority for non-payment of taxes
D)none of the above
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Chapter 12: International Transfer Pricing
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Q1) 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
Q2) While there are many advantages of decentralization,what is the major disadvantage of decentralized organizations?
A)manageability of multiple divisions in both domestic and international operations
B)possible conflict between division managers' decisions and goals of the organization
C)making timely operating decisions
D)all of the above
Q3) Which of the following is a limitation of cost-based transfer pricing?
A)determining which cost to use
B)lack of incentive for selling division to control cost
C)inefficiencies in one unit may be transferred to another unit
D)all of the above
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Chapter 13: Strategic Accounting Issues in Multinational Corporations
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Q1) 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
Q2) What is the limitation of using the net present value for evaluating capital investment alternatives?
A)ignores the time value of money
B)does not consider cash flows
C)cannot be used to compare projects of different size
D)All of the above are limitations of the net present value method.
Q3) Which of the following statements is true about performance evaluation in a multinational organization?
A)A division that is performing poorly indicates that the manager of that division has performed poorly.
B)Good performance by a division indicates that its manager has been performing to expectations.
C)Divisional performance is the same as managerial performance.
D)None of the above is true.
Page 15
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Chapter 14: Comparative International Auditing and Corporate Governance
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Q1) Under Securities and Exchange Commission regulations,who may be a member of an audit committee for a listed company?
A)any member of the corporate board of directors
B)any member of the corporate board of directors who is not a Certified Public Accountant (CPA)
C)only members of the corporate board of directors who do not have a material interest in the company
D)any manager or director of the corporation
Q2) What act of the U.S.Congress advocated creating the Public Company Accounting Oversight Board,required financial statement certification by the CEO and CFO,and requires external auditors to report directly to an audit committee?
A)Securities Act of 1933
B)Securities and Exchange Act of 1934
C)Sherman Anti-Trust Act of 1890
D)Sarbanes-Oxley Act of 2002
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Chapter 15: International Corporate Social Reporting
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Q1) According to Gray which characteristic influences Spain's accounting values and reporting?
A)transparency
B)secrecy
C)flexibility
D)optimism
Q2) What are the most disclosed social report items in Thai 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) Carbon trading is underpinned by what product?
A)carbon neutrality
B)carbon credits
C)carbon taxes
D)carbon offsets
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Page 17