Global Accounting Practices
Pre-Test Questions
Course Introduction
Global Accounting Practices explores the principles, standards, and procedures that govern financial reporting and accounting across different countries and regions. This course examines the impact of globalization on accounting, highlighting the similarities and differences between frameworks such as International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP). Students will analyze how cultural, economic, and legal factors influence accounting practices worldwide, and will develop skills to interpret and compare financial statements prepared under various systems. Through case studies and real-world examples, learners gain a comprehensive understanding of the challenges and opportunities in harmonizing accounting standards in an increasingly interconnected global business environment.
Recommended Textbook
International Accounting 3rd Edition by Timothy Doupnik
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Chapter 1: Introduction to International Accounting
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Sample Questions
Q1) What is the entry point for most companies into the world of international business?
A)Shanghai
B)exporting
C)foreign direct investment
D)cross-listing on international stock exchanges
Answer: B
Q2) Purchasing an option to buy foreign currency at a predetermined exchange rate in order to reduce exchange risk is called:
A)transfer pricing.
B)hedging.
C)translating.
D)cross-listing.
Answer: B
Q3) The multinationality index (MNI)includes the following ratio:
A)foreign working capital to total working capital.
B)foreign cash to total cash.
C)foreign employment to total employment.
D)foreign loans to total loans.
Answer: C
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Page 3
Chapter 2: Worldwide Accounting Diversity
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Sample Questions
Q1) In their 1993 paper,Doupnik and Salter found that countries tended to cluster in terms of the similarities or differences of their accounting systems. These researchers attribute the large cluster around Great Britain to:
A)the superiority of the Anglo accounting model.
B)the predominant influence of Great Britain in the world economy.
C)the colonial influence of Great Britain on accounting development.
D)the fact that more of the world's people speak English than any other language.
Answer: C
Q2) Optimism is a value of accounting standards that would most likely be found in which country?
A)Japan
B)Australia
C)Mexico
D)Brazil
Answer: B
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Page 4
Chapter 3: International Convergence of Financial Reporting
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Sample Questions
Q1) The International Accounting Standards Board was preceded by:
A)the IOSCO.
B)the ASEAN.
C)the IASC.
D)the NRC .
Answer: C
Q2) The IASB's Framework for Preparation and Presentation of Financial Statements (1989)establishes:
A)the required practices that should be followed by accountants in preparing financial statements.
B)the structure,content,and format of financial statements.
C)sanctions for failure to comply with the IASB standards.
D)the concepts to be used in formulating international accounting standards.
Answer: D
Q3) What is the intent of IFRS 1?
A)To establish the guidelines for financial statement presentation
B)Provide the working definitions of accounting elements
C)It gives guidance to first-time adopters of IFRS issued by the IASB.
D)To provide the framework for setting international accounting standards
Answer: C
Page 5
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Chapter 4: International Financial Reporting Standards:
Part I
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Sample Questions
Q1) Under U.S.GAAP,if the carrying value was $50,000,the undiscounted expected future cash flows was $55,000,the discounted expected future cash flows was $51,000 and the selling price was $53,000,what is the amount of Impairment Loss?
A)$5,000
B)$3,000
C)$1,000
D)$0
Q2) What is one major difference between IFRS and U.S.GAAP relative to discontinued operations?
A)U)S.GAAP requires that the after-tax gain or loss from operations and the after-tax gain or loss on asset disposal be shown as a combined item.
B)U)S.GAAP requires the above components to be shown separately.
C)IFRS requires that the after-tax gain or loss from operations and the after-tax gain or loss on asset disposal be shown separately.
D)IFRS requires no separate disclosure for discontinued operations.
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Chapter 5: International Financial Reporting Standards:
Part II
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Sample Questions
Q1) The term "provision" as it is used in IAS 37,is most closely related to what term in U.S.GAAP?
A)Contingent liability,where the outflow of resources is "remote."
B)Contingent liability,where the outflow of resources is "probable."
C)Current liability,where the outflow is difficult to measure.
D)Reserve for bad debt,where the amount recoverable is "uncertain."
Q2) Under IAS 1,Presentation of Financial Statements,which of the following is NOT a definition of a current liability:
A)It is a liability that is expected to be settled in an entity's normal operating cycle.
B)It is a liability primarily held for the purpose of trading.
C)It is a liability that does not have the right to defer until 18 months after the balance sheet date.
D)It is a liability that is expected to be settled within 12 months of the balance sheet date.
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Chapter 6: Comparative Accounting
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Sample Questions
Q1) What links the components of a Japanese keiretsu?
A)a governmental agency
B)a common industry affiliation
C)a common market
D)a bank
Q2) Which term refers to an affiliate relationship between an accounting/auditing firm and its sponsoring organization?
A)parent/subsidiary
B)hooked up
C)guanxi
D)brother/sister
Q3) Who is the main user of accounting information in China?
A)listed companies
B)banks
C)investors
D)the government
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Page 8
Chapter 7: Foreign Currency Transactions and Hedging
Foreign Exchange Risk
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Sample Questions
Q1) What is the fair value of the option on December 31,20x1?
A)$0
B)$500
C)$400
D)$10,000
Q2) What is a foreign currency transaction?
A)It is another name for an international transaction.
B)It is a transaction that involves payment at a date sometime in the future.
C)It is a business deal denominated in a currency other than a company's domestic currency.
D)It is an economic event measured in a currency other than U.S.dollars.
Q3) What is the fair value of the option on December 1,20x1?
A)$0
B)$500
C)$400
D)$10,000
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Chapter 8: Translation of Foreign Currency Financial Statements
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Sample Questions
Q1) Essco Ltd,a foreign subsidiary of Peako Corp.,has written down its inventory to current market value under a "lower of cost or market" rule. When consolidating Essco's balance sheet into Peako's balance sheet,what exchange rate should be used for the inventory under the temporal method?
A)historical rate
B)current rate
C)average rate
D)cannot be determined with the information given
Q2) Which of the following methods uses the current exchange rate to consolidate all accounts of a foreign subsidiary into the financial statements of its parent?
A)current rate method
B)temporal method
C)current/noncurrent method
D)none of the above
Q3) What is another term for "balance sheet exposure?"
A)transaction exposure
B)exchange exposure
C)translation exposure
D)negative exposure
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Chapter 9: Additional Financial Reporting Issues
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Sample Questions
Q1) How do multinational corporations combine operations?
A)The acquired firm is dissolved and is merged into the acquiring company.
B)One company acquires a majority of shares of another company,but both entities continue to exist.
C)Two or more entities dissolve their legal status and merge to create a new corporation.
D)All of the above.
Q2) Mega Corporation acquired 65% of the voting shares of Forko Ltd and consolidated its accounts by restating assets and liabilities of the subsidiary at fair value on the date the shares were acquired. What method of accounting for the business combination is Mega Corporation using?
A)Purchase method
B)Fair value method
C)Pooling method
D)Current replacement cost method
Q3) Holding monetary liabilities during a period of inflation results in:
A)purchasing power gains.
B)purchasing power losses.
C)transaction gains.
D)translation losses.
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Chapter 10: Analysis of Foreign Financial Statements
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Sample Questions
Q1) The debt ratio of Dynasty Industries,a Japanese corporation,is 62%. Why might this be difficult to compare to the debt ratio of a U.S.manufacturing corporation?
A)U)S.companies generally have debt ratios greater than 62%.
B)U)S.companies generally have debt ratios less than 62%.
C)Japanese financing preferences may be different from American preferences.
D)Japanese companies report assets and liabilities in yen,whereas U.S.companies report in dollars.
Q2) Which of the following is most likely to affect an analyst's ability to make meaningful comparisons of financial statement ratios for companies in different countries?
A)differences in currency
B)language differences
C)varying business traditions
D)mathematical degrees of magnitude
Q3) Which is NOT one of the common sources of distortions in financial statements?
A)accounting standards that are inconsistent with economic reality
B)management estimation errors
C)miscalculation of foreign currency translation
D)management of earnings
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Page 12
Chapter 11: International Taxation
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Sample Questions
Q1) What is a tax holiday?
A)A trip made to tax havens to buy goods free of sales tax
B)The time between the date of filing the corporate income tax return and the date when taxes are due to be paid
C)This is a period of time when corporations are relieved of paying various taxes.
D)This is the deadline for filing federal tax returns.
Q2) What is a withholding tax?
A)Income tax paid on corporate earnings.
B)an amount subtracted from a dividend payout and remitted to the government
C)This is an income tax corporations pay to local governments in addition to the national income tax.
D)taxes that lower the effective tax rate in a country
Q3) In general,why do countries wish to avoid double taxation on corporations?
A)The calculations of the taxes are excessively complex.
B)It discourages foreign direct investment.
C)Enforcement of the tax law becomes excessively burdensome.
D)It contributes to accounting diversity.
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Chapter 12: International Transfer Pricing
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Sample Questions
Q1) What is the advantage of an advance pricing agreement?
A)IRS will not challenge the transfer price after the tax return is filed if the agreement is followed.
B)World-wide taxes will be minimized.
C)The brief form explaining the transfer price to be used can be completed with minimal effort by the taxpayer,but will reduce a tremendous amount of work later.
D)All of the above are advantages of APA.
Q2) A multinational corporation may attempt to minimize the taxes it pays in a country with a high effective tax rate by setting a very high transfer price on goods transferred to a subsidiary in a high-tax country. Why is this often not successful?
A)Laws in the foreign country may prohibit such a scheme.
B)The high transfer price would actually increase taxes.
C)Foreign exchange losses will eliminate any tax savings.
D)none of the above.
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14
Chapter 13: Strategic Accounting Issues in Multinational Corporations
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Sample Questions
Q1) Implementing multinational corporate strategy to influence human behavior in a positive way should include:
A)a target for managers that is possible under ideal conditions
B)consideration of cultural differences across units
C)all exchange rate gains and losses
D)measures of profit,residual income,and return on investment for all units
Q2) The possibility of loss due to unexpected changes in currency values or interest rates is called:
A)economic risk
B)business risk
C)financial risk
D)political risk
Q3) Why is the multinational capital budgeting process more complex than capital budgeting in a domestic environment?
A)Cash flows must be predicted.
B)An appropriate discount rate must be selected.
C)There are additional risks involved.
D)The payback period is shorter.
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Chapter 14: Comparative International Auditing and Corporate Governance
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Sample Questions
Q1) Under the Sarbanes-Oxley Act of 2002,to whom does the audit committee report?
A)management of the corporation
B)external auditor
C)board of directors
D)internal audit department
Q2) Which of the following terms is NOT defined by statute in the Companies Act of the United Kingdom?
A)accountant
B)auditor
C)independence
D)None of these terms is defined in the Companies Act of the U.K.
Q3) In multinational corporations,to whom are the external auditors responsible according to OECD guidelines?
A)corporate management
B)stockholders
C)government of the host country
D)creditors
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Page 16
Chapter 15: International Corporate Social Reporting
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Questions
Q1) What is another name by which corporate social reporting (CSR)is also known?
A)corporate integrity reporting
B)corporate image reporting
C)ecological footprint reporting
D)non-monetary bottom line reporting
Q2) GRI stands for:
A)Global Research Initiative
B)Global Reporting Initiative.
C)Greenhouse Reporting for Industries
D)Greenhouse Regulation Initiative
Q3) 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
Q4) In which country has the "GRI-Certified Training Program" been implemented?
A)Brazil
B)India
C)the United States
D)all of the above
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