Questions:
At the end of this section, a space is provided for you to type in your answers.
1. Which of the following statements is true about U.S. taxation of foreign subsidiaries?
A) The U.S. does not tax income generated on subsidiaries incorporated in foreign countries.
B) U.S. tax on foreign operations does not have to be paid until the income is brought back to the United States.
C) U.S. multinationals pay tax on their worldwide income as soon as it is earned.
D) Transfer pricing will eliminate taxes by the U.S. government on multinational corporations.
2. According to IAS 37, how should contingent assets be recognized?
A) They should be disclosed in the notes to the financial statements if the inflow of resources is probable.
B) They should be recognized like any other asset, with a debit to "contingent assets."
C) They should not be disclosed anywhere in the financial statements due to their uncertainty.
D) They should only be disclosed in the notes to the financial statements if the inflows of resources are virtually certain.
3. What would be a logical first step that should be taken to restate foreign financial statements to conform to U.S. GAAP, assuming a four-column worksheet will be used to post debit and credit adjustments and reclassifications to arrive at U.S. GAAP statements?
A) Convert the foreign currency amounts to U.S. dollars.
B) Re-order foreign financial statements to U.S. format.
C) Restate historical costs to current cost basis.
D) Determine the amount of foreign exchange gains or losses.
4. When accounting rules are left up to professional associations rather than being legislated by governmental bodies, what is the likely result?
A) Very general accounting rules are created, as in code law countries.
B) Very detailed rules for practice are created, as in common law countries.
C) Very general accounting rules are created, as in common law countries.
D) Very detailed rules for practice are created, as in code law countries.
5. Which of the following is a non-financial measure of performance?
A) return on investment
B) return on equity
C) earnings per share
D) market share
6. 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.
7. 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
8. Which of the following is generally true about the differences between U.S. GAAP and IASB standards?
A) U.S. GAAP tends to be more rule-based and the IASB standards tend to be principles-based.
B) U.S. GAAP is generally more flexible than IASB standards.
C) More professional judgment is required to apply U.S. GAAP than is required for implementing IASB standards.
D) In all cases, U.S. GAAP is more detailed than the IASB standards.
9. A representative market basket of products cost $250 at the beginning of the year, and the same collection of products costs $280 at the end of the year. What is the annual rate of inflation?
A) 10.7%
B) 112%
C) 12%
D) -10.7%
10. 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 to the 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
11. Under FASB's new lease accounting standard, lessees will recognize most leases on what statement:
A) Balance Sheet
B) Income Statement
C) Statement of Cash Flows
D) None of the above
The next set of questions are True/False, please indicate your answer on the blank answer key provided.
12. The mission of the IASB is to develop, in the public interest, high quality accounting standard that countries can use as the basis for designing their own national standards.
13. The IFRS Foundation decides which countries must use IFRS.
14. Over 100 jurisdictions currently required IFRS for all or most domestic listed companies.
15. Under IFRS, when one company (the parent) controls another company (the subsidiary), the parent is required to prepare consolidated financial statement (with limited exceptions).
16. Under IFRS, a company must disclose information about its relationships and transactions with related parties and about compensation of key management personnel.
17. A foreign (non-US) company listed on the NYSE is permitted to use IFRS rather than US GAAP for filings in the US.
18. Because the IASB operates in the public interest, its standards are not copyrighted, and anyone is free to republish them or use them in other ways.
19. Under IFRS, the objective of financial reporting is to provide financial information about a company that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to the company.
20. The Conceptual Framework specifies the form and content of the financial statements that a company must present in conformity with IFRS.
21. IFRS requires a listed company to disclose information about the different products and services it sells and the different geographical areas in which it operates.
22. The disclosures about financial assets and financial liabilities that are required by IFRS 7 Financial Instruments: Disclosures apply only to banks, insurance companies and other financial institutions.