International Financial Reporting Standards
Exam Preparation Guide
Course Introduction
This course provides a comprehensive introduction to International Financial Reporting Standards (IFRS), focusing on the principles, concepts, and applications that govern the preparation and presentation of financial statements for entities operating in the global business environment. Students will explore the structure, development, and objectives of IFRS, and compare them to other accounting frameworks such as US GAAP. Topics include recognition, measurement, and disclosure requirements for key financial statement elements, including assets, liabilities, equity, income, and expenses. Through practical case studies and real-world examples, students will gain a thorough understanding of how IFRS promotes transparency, accountability, and comparability in financial reporting across international markets.
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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Q1) What is one reason for the tremendous increase in the flow of foreign direct investment from 1982 to 2007?
A)Transfer pricing
B)The liberalization of investment laws in many countries
C)The similarities in tax rates and tax laws across the globe
D)The availability of hedging instruments
Answer: B
Q2) The ownership and control of foreign assets such as a manufacturing plant is called: A)a hedge.
B)foreign direct investment.
C)exposure.
D)derivatives.
Answer: B
Q3) Which of the following statements is true about international transfer pricing?
A)It is a violation of the Foreign Corrupt Practices Act.
B)It is accomplished using guidelines set up by the FASB.
C)It is used to minimize the amount of worldwide taxes.
D)Most countries do not regulate it.
Answer: C
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Page 3
Chapter 2: Worldwide Accounting Diversity
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Q1) 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
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
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Chapter 3: International Convergence of Financial Reporting
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Q1) What is the role of the liaison members of the International Accounting Standards Board?
A)To facilitate information exchange and cooperation between the FASB and the IASB
B)To eliminate the political influences on the IASB and national accounting bodies
C)To enforce adherence to the fundamental principles of the IASB
D)All of the above
Answer: A
Q2) The second phase (1989-1993)of the IASC's efforts to harmonize accounting standards was aimed at what goal?
A)Making international accounting standards more flexible
B)Creating greater financial statement comparability across countries
C)Adding new alternatives for accounting practice desired by the international community
D)Strengthening the enforcement power of the IASC
Answer: B
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Chapter 4: International Financial Reporting Standards:
Part I
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Q1) According to IFRS 8 (Segment Reporting),which is not one of the three criteria for defining an operating segment?
A)An operating segment can't merely be a lessor.
B)An operating segment is a component of a business that generates revenues.
C)An operating segment is a component of a business whose operating results are regularly reviewed by the chief operating officer.
D)An operating segment has separate financial information available.
Q2) When a patent or trademark is acquired in a business combination,what does IAS 38 say about recording these intangibles?
A)If they had not been previously recorded as separate assets by the acquired company,they should always be recorded as "Goodwill" on the balance sheet of the company acquiring them.
B)The cost of the intangibles should be expensed by the acquiring company on the merger date.
C)They should be recorded as separate intangible assets only if their useful life is indefinite.
D)They should be recorded as separate intangible assets if their fair value can be reliably measured.
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Page 6
Chapter 5: International Financial Reporting Standards:
Part II
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Q1) Under IAS 37,how are contingent liabilities treated in the financial statements?
A)IAS 37 does not address contingent liabilities.
B)They are recorded as current liabilities if the amount is reasonably measured.
C)They are disclosed in the notes to the financial statements when there is more than a remote possibility of an outflow of resources.
D)They are not disclosed.
Q2) Under IFRS 2,with respect to choice-of-settlement share-based payments,if it is the entity that has the right to choose between equity settlement and cash settlement,when must the entity choose the cash settlement?
A)if the supplier provides services
B)if the supplier provides goods
C)if the entity has a present obligation to settle in cash
D)The entity always has the option to choose either method.
Q3) IAS 18,Revenue,covers which types of revenues?
A)sale of goods
B)rendering of services
C)interest,royalties,and dividends
D)all of the above
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Chapter 6: Comparative Accounting
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Q1) What body regulates trading of corporate securities in the People's Republic of China?
A)National People's Congress
B)State Council
C)Securities and Exchange Commission
D)Chinese Security Regulatory Commission
Q2) The People's Republic of China made economic reforms in the 1980s to encourage international trade. What impact have these reforms made on accounting?
A)Increased the demand for accounting information from investors.
B)Increased the supply of publicly available accounting information from Chinese companies.
C)Changed the nature of auditing in the PRC.
D)All of the above are true.
Q3) Why is public disclosure of financial information less important in Japan than in other industrialized countries?
A)Very few corporations
B)Undeveloped stock exchange
C)Heavy reliance on bank financing.
D)Strong government control of corporations
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Page 8
Chapter 7: Foreign Currency Transactions and Hedging
Foreign Exchange Risk
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Q1) For an upcoming trip,Pat wants to buy Euros at the local bank when the current exchange rate quoted on HYPERLINK "http://www.OANDA.com" http://www.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
Q2) What has occurred when one company arranges to buy a foreign currency some time in the future,at an exchange rate quoted today?
A)The company has purchased a foreign currency option.
B)The company has entered a forward contract.
C)The currency has been devalued.
D)None of the above
Q3) When a currency is allowed to increase or decrease in value relative to other currencies,the currency is said to:
A)be pegged to another currency.
B)be less valuable.
C)float.
D)devalue.
Page 9
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Chapter 8: Translation of Foreign Currency Financial Statements
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Q1) Which of the following methods for translating foreign currency financial statements attempts to produce consolidated financial statements as if a subsidiary had actually used the parent company's currency for all its transactions?
A)Current/Noncurrent method
B)Monetary/Nonmonetary method
C)Current rate method
D)Temporal method
Q2) 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
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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Q1) Prior to 2007,which method of accounting for inflation most closely represented the supplemental reporting required in Mexico?
A)Current replacement cost
B)Current cost
C)General purchasing power
D)Historical cost
Q2) According to IFRS 3,how should companies account for Goodwill arising from business combinations?
A)It is capitalized and amortized over a period of no more than 40 years.
B)It is expensed in the year the subsidiary is acquired.
C)It is capitalized and written down when its fair value become less than its carrying value.
D)It is amortized over between 5 and 40 years.
Q3) Holding monetary assets 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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11
Chapter 10: Analysis of Foreign Financial Statements
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Q1) What is the probable reason that many foreign countries provide convenience translations of their financial statements into English?
A)U)S.GAAP is the most widely used set of financial accounting standards.
B)Globalization of capital markets has increased the demand for English language financial statements.
C)England is the home of more multinational corporations than any other country.
D)The Securities and Exchange Commission requires all foreign companies doing business in the U.S.to provide English translations.
Q2) What is the basis for Morgan Stanley Dean Witter's "Apples to Apples" system for financial statement analysis?
A)adjustments needed to compare companies within a single country
B)adjustments needed to compare international companies within specific industries
C)adjustments needed to compare companies in specific countries to U.S.companies
D)adjustments needed to compare the performance of international brokerage firms
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12
Chapter 11: International Taxation
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Q1) Under U.S.tax law,what is the basis for the overall foreign tax credit limitation?
A)to make sure that foreign governments get their fair share of a foreign subsidiary's income
B)to ensure that the foreign tax credit taken by a corporation does not exceed the actual foreign tax it paid
C)to make sure that the foreign tax credit taken by a corporation does not exceed the amount of taxes the foreign affiliate would have paid in the U.S.
D)to minimize world-wide taxes on the U.S.corporation
Q2) Which of the following is the most important type of Subpart F income?
A)Income from countries engaged in international boycotts
B)Income from foreign base companies
C)Income from insurance of U.S.risks
D)Income from illegal payments
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 worldwide taxes paid
D)minimize foreign taxes
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Chapter 12: International Transfer Pricing
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Q1) A cost-plus transfer pricing scheme is allowed by the Internal Revenue Service when:
A)it is easiest for the taxpayer to calculate.
B)the related party is primarily a sales subsidiary.
C)there is no readily comparable market price and the related buyer is more than just a distributor.
D)the average industry mark-up is greater than the taxpayer's standard markup.
Q2) The "price" for using intangible property is called:
A)interest.
B)rent.
C)royalty.
D)service charge.
Q3) What is an ad valorem import duty?
A)a requirement that a parent buy the output of a foreign subsidiary
B)a tariff charged by a government on the invoice price of goods coming into its country
C)a requirement that a subsidiary acquire its material inputs from a foreign parent
D)a tax charged on intercompany transactions
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14
Chapter 13: Strategic Accounting Issues in Multinational Corporations
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Q1) Which of the following should NOT be included in implementing performance evaluation systems?
A)Feedback and review
B)Fair and achievable measures
C)Understandability
D)Changing systems annually
Q2) SSM Corporation,a multinational healthcare system,measures the number of minutes between a patient's arrival at the emergency room and the time he/she is seen by a physician. This measure focuses on what aspect of the balanced scorecard?
A)financial perspective
B)customer perspective
C)internal business processes perspective
D)innovation and learning perspective
Q3) Where would a divisional manager look to find the targets she is expected to reach in the next fiscal year?
A)strategic plan
B)capital budget
C)operating budget
D)strategic formulation
Page 15
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Chapter 14: Comparative International Auditing and Corporate Governance
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Q1) 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
Q2) Auditors in the United Kingdom sometimes include disclaimers of liability in their audit reports. According to the U.S.Securities and Exchange Commission,how effective is this approach to limiting civil liabilities?
A)It has no effect when included in the financial statements of U.S.companies.
B)It effectively caps the damage awards that will be made in U.S.civil courts.
C)It limits who can bring civil action in cases involving the audit of U.S.companies.
D)It limits both civil and criminal liability against auditors of U.S.companies.
Q3) In what countries would one expect auditing standards to evolve based on the needs perceived by the auditing profession?
A)code law countries
B)members of the European Union
C)countries that follow common law
D)countries with strong accounting laws
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Chapter 15: International Corporate Social Reporting
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Q1) In which of the following countries do companies tend to provide the most extensive environmental disclosure?
A)Canada
B)The United States
C)The United Kingdom
D)Australia
Q2) What is one thing that few companies tend to report on in their corporate social report disclosures?
A)international disaster response
B)the risk of legal action or business disruptions caused by climate issues
C)the level of GHG reduction
D)community involvement
Q3) In which company is there a strong correlation between high profitability and sustainability reporting?
A)Coca-Cola
B)Microsoft
C)IBM
D)all of the above
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