Global Accounting Standards
Test Questions
Course Introduction
Global Accounting Standards explores the principles, frameworks, and applications of accounting standards adopted worldwide, with a particular focus on the International Financial Reporting Standards (IFRS) and their comparison to other major standards such as US Generally Accepted Accounting Principles (GAAP). The course examines the processes of standard-setting, the rationale for convergence, and the impact of these standards on financial reporting, transparency, and cross-border business operations. Students will analyze case studies to understand the challenges and opportunities presented by global harmonization, and develop skills necessary to interpret and apply these standards in multinational contexts.
Recommended Textbook
International Accounting 5th Edition by Frederick
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D. S. Choi
Chapter 1: Introduction to International Accounting
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Q1) 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
Q2) What is the primary role of internal auditing in a multinational corporation?
A) To assist the external auditors in completing the financial statement audit in a timely fashion
B) To make sure that employees comply with local customs and traditions
C) To ensure that corporate policies and procedures are being followed and to assess operating efficiency
D) To prepare the consolidated financial statement of the corporation in compliance with international accounting standards
Answer: C
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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) In Gray's framework for accounting system development, 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
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Chapter 3: International Convergence of Financial Reporting
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Q1) In November 2007, which of the following organizations removed the requirement that foreign private issuers using IFRS reconcile their financial statements to U.S. GAAP?
A) IASB
B) EU
C) SEC
D) FASB
Answer: C
Q2) 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
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Page 5
Chapter 4: International Financial Reporting Standards:
Part I
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Sample Questions
Q1) How is control determined when a parent company does not own a majority of the voting stock of a subsidiary?
A) Controlling the subsidiary's investing activities.
B) Controlling the subsidiary's operating activities.
C) Controlling the subsidiary's financing activities.
D) Criteria that establish effective control include control of the subsidiary's senior management or board of directors, the control of the subsidiary's operating, investing, or financing activities, and the right to obtain control by buying more shares after a triggering event.
Q2) Chien Bleu Ltd. purchased a building in 2009 for 10,000,000 and as of December 31, 2015 had, recorded accumulated depreciation on the building of 3,000,000. On December 31, 2015, the company conducted its first revaluation when the fair value was 12,000,000. According to IAS 16, what account should be credited for 5,000,000?
A) Loss on Revaluation-Building
B) Gain From Revaluation of Building
C) Revaluation Surplus-Building
D) Revaluation Revenue-Building
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Page 6
Chapter 5: International Financial Reporting Standards:
Part II
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Q1) 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.
Q2) Under IFRS 15, Revenue from Contracts with Customers, which of the following is NOT one of the steps to be applied in the recognition of revenue across a wide range of transactions and industries?
A) Identify the contract with a customer.
B) Do not separate the transaction price for separate performance obligations if the contract is a bundled contract where goods and services are not sold separately.
C) Identify the separate performance obligations in the contract.
D) Determine the transaction price.
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Chapter 6: Foreign Currency Transactions and Hedging
Foreign Exchange Risk
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Q1) What is foreign exchange risk exposure?
A) The possibility of a loss because of changes in the value of a foreign currency
B) Losses caused by paying for purchased goods in a foreign currency
C) Losses caused by receiving payment in a foreign currency for goods sold
D) All of the above
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.
Q3) How should discounts or premiums on forward contracts be treated if the derivative is hedging a foreign-currency-denominated asset?
A) Carried on the balance sheet until the contract is completed
B) Included in income in the period the derivative is acquired
C) Amortized over the life of the forward contract
D) None of the above
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Page 8
Chapter 7: Translation of Foreign Currency Financial Statements
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Q1) Which of the following statements is true of non-local currency balances in the foreign currency financial statements of foreign operations?
A) These are not reported in the consolidated financial statements.
B) Any gain is shown in the balance sheet of the company as an asset.
C) Any loss is reflected in the measurement of consolidated net income.
D) No gain or loss is reported in the financial statements.
Q2) Which of the following items in the balance sheet is subject to accounting exposure?
A) Only assets
B) Only liabilities and owners' equity
C) All accounts translated at historical exchange rates
D) All accounts translated at current exchange rates
Q3) When the parent company of a foreign subsidiary believes that all of its investment in the subsidiary is exposed to foreign exchange risk, what method of translation should be used in consolidating the financial statements?
A) Current rate method
B) Current/noncurrent method
C) Monetary/nonmonetary method
D) Temporal method
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Chapter 8: International Taxation
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Q1) How does the U.S. government tax controlled foreign corporations (CFC) differently from other subsidiaries?
A) All income of the CFC is taxed by the U.S. in the year it is earned rather than when dividends are received.
B) Some income of the CFC is taxed by the U.S. in the year it is earned rather than when dividends are received.
C) None of the income generated by the CFC is subject to U.S. tax.
D) Only interest income from CFC is taxed in the year received by the U.S. government.
Q2) 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
Q3) What is the international norm for determining tax jurisdiction?
A) Residence takes precedence over source
B) Citizenship takes precedence over residence
C) Source takes precedence over residence
D) Domestic takes precedence over foreign
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Chapter 9: International Transfer Pricing
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Q1) The Internal Revenue Service determined that Covington Ltd. should have been using a transfer price of $400 for the purchase of goods from its U.S. subsidiary but had set the price at $50. What is the rate of penalty that the IRS can impose on the taxpayer?
A) 10% of the amount of taxes underpaid
B) 20% of the amount of taxes underpaid
C) 40% of the amount of taxes underpaid
D) 100% of the amount of taxes underpaid
Q2) In a recent survey, what issue did 30% of respondents identify as the most important international tax issue they face?
A) Foreign currency translation of taxable income
B) Double taxation
C) Transfer pricing
D) Withholding taxes
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 10: Management Accounting Issues in Multinational Corporations
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Q1) Johnson Ltd. determined that the net present value of an investment in technological improvements at its plant in France would be 10,000,000 if pending litigation was resolved in the company's favor and would be 2,000,000 if the courts ruled against the company. Johnson's attorneys in France assessed the probability of a favorable ruling at 70%. What is the expected net present value of the project?
A) 10,000,000
B) 2,000,000
C) 6,000,000
D) 7,600,000
Q2) If only one currency is used for evaluating subsidiary performance in a multinational corporation, what currency is it most likely to be?
A) Euros
B) Local currency of the subsidiary
C) Currency of the parent company's home country
D) None of the above
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Chapter 11: Auditing and Corporate Governance: An International Perspective
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Q1) Which of the following is a main function of internal auditing in multinational corporations?
A) Preparing the annual report to corporate shareholders
B) Selecting independent members for the board of directors
C) Helping external auditors with the financial statement audit
D) Monitoring risks and assessing their effect on the company
Q2) In an effort to harmonize international auditing standards on a regional level, the European Union has issued directives pertaining to this end. Its Eighth Directive caused the United Kingdom to change the country's long-held standard for individuals wishing to be auditors. Which of the following is a new requirement for auditors in the UK?
A) Auditors must be members of a recognized professional association, such as the ICAEW.
B) New entrants to the auditing profession must hold a university degree in accountancy.
C) Auditors may now be a citizen of any country in the European Union rather than just the UK.
D) New members of the auditing profession must have a university degree.
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Chapter 12: International Sustainability Reporting
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Q1) The theory that sustainability reporting is a means of dealing with the firm's exposure to political, economic, and social pressures is called:
A) Government Accountability Theory
B) Stakeholder Theory
C) Consumer Theory
D) Legitimacy Theory
Q2) Which are among the largest Scope 1 emitting entities?
A) Building materials companies, such as LafargeHolcim
B) Electric utilities companies that burn substantial amounts of fossil fuels
C) Local businesses that people must drive long distances to get to
D) Building materials companies, such as LafargeHolcim & Electric utilities companies that burn substantial amounts of fossil fuels
Q3) The International Standards Organization (ISO) has published standards explicitly relating to:
A) Anti-bribery management systems
B) Social responsibility
C) Environmental management
D) All of the above
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