International Financial Management
Exam Solutions
Course Introduction
International Financial Management explores the financial decision-making processes of firms operating in a global marketplace. The course covers key topics such as foreign exchange markets, currency risk management, international financing and investment decisions, and cross-border capital budgeting. Students will analyze how multinational corporations navigate international financial systems, manage risks associated with exchange rate fluctuations, and utilize global financial instruments. Emphasis is placed on understanding the impact of macroeconomic factors and international regulations on financial strategies, preparing students for the complexities of managing finance in an interconnected world.
Recommended Textbook
International Accounting 5th Edition by Frederick
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12 Chapters
677 Verified Questions
677 Flashcards
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D. S. Choi
Page 2
Chapter 1: Introduction to International Accounting
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57 Verified Questions
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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) The number of companies involved in international trade has grown significantly in recent years. What percent of U.S. exporters are relatively small companies (i.e. less than 500 employees)?
A) Less than 5%
B) 10%
C) 25%
D) More than 90%
Answer: D
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Chapter 2: Worldwide Accounting Diversity
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Sample Questions
Q1) Which of the following is NOT a problem caused by accounting diversity?
A) Lack of qualified international auditors
B) Preparation of consolidated financial statements
C) Access to foreign capital markets
D) Comparability of financial statements
Answer: A
Q2) Gray argues that national cultural values affect accounting values. If Country X ranks low on uncertainty avoidance, which of the following statements would be true?
A) The country would rank high on the accounting values of uniformity.
B) The country would rank high on the accounting values of secrecy.
C) The country would rank low on the accounting values of professionalism.
D) The country would rank low on the accounting values of conservatism.
Answer: D
Q3) International accounting diversity can be found in terms of:
A) the terminology used in the financial statements.
B) the amount of information disclosed in the financial statements.
C) the order of items in the financial statements.
D) All of the above evidence of accounting diversity.
Answer: D
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Page 4
Chapter 3: International Convergence of Financial Reporting
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Sample Questions
Q1) Which of the following statements is true of the International Accounting Standards Board (IASB)?
A) The Board consists of 16 members.
B) The Board should contain 6 part-time members.
C) At least 13 members of the Board must have experience as auditors.
D) All members of the Board should be from a single country.
Answer: A
Q2) Which of the following is NOT a major concern related to convergence of international accounting standards?
A) The complicated nature of particular standards
B) The tax-driven nature of the national accounting regime
C) An overload of guidance on the first-time application of IFRS
D) IFRS language translation difficulties
Answer: C
Q3) Which of the following statements is true of IFRS 1?
A) It does not permit the recognition of intangible assets in balance sheets.
B) After its issuance in July 2001, it has not been amended as of yet.
C) It deals primarily with fair value measurement of assets.
D) It provides exemptions to complying with IFRS in specific areas.
Answer: D
Page 5
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Chapter 4: International Financial Reporting Standards:
Part I
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Sample Questions
Q1) Blanco Chemical Company spent 15,000,000 in development efforts to create a fertilizer for which it was able to obtain a patent; however, the expected distribution costs make it infeasible to market the chemical in the foreseeable future. According to IAS 38 (Intangible Assets), how should Blanco Chemical Company record the 15,000,000?
A) As a "Deferred Development Cost" on the Balance Sheet
B) As "Fertilizer Revenue" on the Income Statement
C) As "Development Expense" on the Income Statement
D) It should only be reported in the notes to the financial statements.
Q2) Under IAS 40 (Investment Property), gains or losses from revaluation are:
A) recognized in revaluation surplus.
B) recognized in current income.
C) not permitted.
D) recognized either in current income or revaluation surplus at the option of management.
Q3) As defined by IAS 38, how are intangible assets unlike other assets?
A) They must have arisen from past events.
B) Their value cannot be reasonably measured.
C) They must be controlled by enterprises.
D) They are nonmonetary and lack physical substance.
Page 6
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Chapter 5: International Financial Reporting Standards:
Part II
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Sample Questions
Q1) With respect to post-employment medical benefits, U.S. GAAP:
A) does not recognize the concept of post-employment medical benefits.
B) has considerably less guidance than IAS 19.
C) follows the guidance of IAS 19.
D) has considerably more guidance than IAS 19.
Q2) Why is it difficult to compare IFRS15/ASC606, Revenue, to U.S. GAAP?
A) The IASB definition of revenue is very complicated, whereas the definition of revenue under U.S. GAAP is straightforward.
B) Revenue is not defined under U.S. GAAP.
C) There is no single standard in U.S. GAAP that deals solely with revenue.
D) Under U.S. GAAP, revenue is defined in terms of cash, whereas IAS 18 defines revenue in terms of a variety of resources.
Q3) Under IAS 32, which of the following is not a financial asset?
A) Investment in equity instruments accounted for under the equity method
B) Cash
C) A 10% investment in a subsidiary
D) Loans to other entities
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Page 7
Chapter 6: Foreign Currency Transactions and Hedging
Foreign Exchange Risk
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Sample Questions
Q1) How is the fair value of a foreign currency option calculated?
A) By using the Box-Jenkins technique
B) Using the modified Black-Scholes pricing model
C) Through an arms-length transaction
D) Using quotes given daily in the Wall Street Journal
Q2) For an upcoming trip, Pat wants to buy Euros at the local bank when the current exchange rate quoted on OANDA.com was $1.563 per 1. What should Pat plan to pay for 1,000?
A) exactly $1,563
B) more than $1,563
C) about $640
D) less than $640
Q3) When accounting for forward contracts, what is meant by the term "executory contract"?
A) No cash changes hands
B) The CEO of the company is the only one authorized to engage in the contract
C) There must be a price paid for the option
D) The contract is valid if one of the parties sign it
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Chapter 7: Translation of Foreign Currency Financial Statements
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Sample Questions
Q1) Non-monetary assets DO NOT include:
A) fixed assets.
B) inventory.
C) accounts receivable.
D) customer deposits.
Q2) Under both the temporal method and the current rate method, what exchange rate should be used to translate a foreign subsidiary's dividends into parent company currency?
A) Current rate
B) Historical rate
C) Average rate
D) Any of the above methods can be used under both the temporal and current method.
Q3) Under the temporal method of consolidating foreign currency financial statements, what exchange rate should be used for translating the depreciation expense recorded by a subsidiary?
A) Average rate
B) Current rate
C) Historical rate
D) Forward rate
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Chapter 8: International Taxation
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Sample Questions
Q1) What is a tax haven?
A) A jurisdiction where taxes are abnormally low
B) A location where tax cheats live to escape prosecution
C) A tax jurisdiction where world-wide tax is eliminated
D) Locations that provide tax-based incentives to corporations
Q2) Under U.S. tax law, what happens to excess foreign tax credit?
A) It reduces taxes on ordinary income in the current year.
B) It can be carried back one year to calculate a refund on additional taxes paid in U.S. on foreign source income.
C) It is lost unless the average foreign tax rate paid by the company in the future is greater than the U.S. tax rate.
D) None of the above
Q3) How might a parent company's home country eliminate double taxation on foreign source income?
A) Tax credits for taxes paid to foreign countries
B) Tax deductions for taxes paid to foreign countries
C) Taking a territorial approach to taxing income
D) All of the above
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Chapter 9: International Transfer Pricing
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Sample Questions
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) 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) In 2016, what portion of total U.S. goods trade was made up of intercompany transactions?
A) 20.1%
B) 82.3%
C) 42.4%
D) 11.0%
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Chapter 10: Management Accounting Issues in Multinational Corporations
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Sample Questions
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) In designing an effective management control system for a multinational corporation, the accountant should measure factors appropriate for each unit's level of responsibility. Which of the following measures would be appropriate for evaluating the performance of an investment center?
A) Output on costs of input
B) Residual income
C) EBIT
D) All of the above
Q3) 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.
Page 12
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Chapter 11: Auditing and Corporate Governance: An International Perspective
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Sample Questions
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) What term is used to refer to the probability that an accounting error or irregularity is detected and reported?
A) Accounting risk
B) Audit risk
C) Audit quality
D) Transaction risk
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Chapter 12: International Sustainability Reporting
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Sample Questions
Q1) The SASB's Human Capital category includes which of the following topics?
A) Data security
B) Air quality
C) Human rights and community relations
D) Fair labor practices
Q2) What best describes the SASB's materiality map?
A) It describes which materials are the most toxic to the environment
B) It focuses on the pollutants emitted by the company's operations and ranks them from most to least damaging
C) It was developed by companies to respond to stakeholder pressure for environmental stewardship
D) It's an objective study of nonfinancial materiality viewed through an investment lens
Q3) Which of the following sustainability topics is most likely to be highly material to an apparel company, such as Nike?
A) Data security
B) Child labor in the factories of suppliers
C) Biodiversity impacts on endangered species.
D) Product safety
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