CH 12

      Subsidiary A sells inventory that cost $5 to Subsidiary B for $20. Subsidiary B then sells the finished goods that cost $20 to an independent third party for $45. Which price is the transfer price?

(a)     $5

(b)    $20

(c)     $40

(d)    $15 (profit on sale from A to B) 

(e)     $25 (profit on sale from B to third party)

(b)    $20

CH 12

      A MNC has two subsidiaries - Subsidiary A, located in Country A, and Subsidiary B, located in Country B. Subsidiary A sells its entire output to Subsidiary B at an agreed upon transfer price. Lowering the transfer price

(a)     Reduces the income taxes paid to Country A

(b)    Should be considered if Country A restricts dividend payments while Country B does not

(c)     Should be considered if the currency of Country B is more stable than the currency of Country A 

(d)    none of the above

(d)    none of the above

CH 12

(c)     It is necessary to do so to clearly reflect income

CH 12

      Which of the following is not a reported environmental influence on transfer prices?

(a)     Host country taxes

(b)    U.S. taxes

(c)     Language differences

(d)    Market conditions in the host country 

(e)     Reasonable profit for host country

(c)     Language differences

CH 12

      Conditions in the host country that would induce a low transfer price on flows from the host country would include:

(a)     Corporate income tax rate lower than in the home country

(b)    Corporate income tax rate higher than in the home country

(c)     Significant competition

(d)    Local loans based on financial appearance of host subsidiary 

(e)     All of the above

(b)    Corporate income tax rate higher than in the home country

CH 12

      Which of the following is true about advance pricing agreements (APA)?

(a)     They are only granted for intercompany transactions between a U.S. parent and a foreign subsidiary

(b)    They are only granted for intercompany transactions between a foreign parent and a U.S. corporation

(c)     APA is an agreement between U.S. corporation and a foreign subsidiary to apply an agreed-on transfer pricing method to specified transactions 

(d)    None of the above is true

(d)    None of the above is true

CH 12

      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 among of work later 

(d)    All of the above are advantages of APA

(a)     IRS will not challenge the transfer price after the tax return is filed if the agreement is followed

CH 12

      According to IRS Code Section 482, what is the standard used by the IRS for international transfer pricing?

(a)     Cost-based prices

(b)    Discretionary prices

(c)     Negotiated prices 

(d)    Arm’s length prices

(d)    Arm’s length prices

CH 12

      The monetary amount used to record intercompany transactions is called:

(a)     Exchange rate

(b)    Transfer price

(c)     Conversion rate 

(d)    Incremental cost

(b)    Transfer price

CH 12

      ABC Limited uses the same management control system in all of its 100 facilities throughout the world on the assumption that the culture at the home office is transferable to all other locations. What principle underlies ABC’s control system?

(a)     Polycentrism

(b)    Ethnocentrism

(c)     Geocentrism 

(d)    egocentrism

(b)    Ethnocentrism

CH 13

      A U.S. parent would find the best communications capabilities with a subsidiary located in

(a)     Beijing

(b)    Nepal

(c)     Shanghai

(d)    Singapore 

(e)     Senegal

(d)    Singapore

CH 13

      Which of the following factors affects a foreign subsidiary’s budgeted cash flow?

(a)     Tax laws

(b)    Inflation

(c)     Exchange rate

(d)    All of the above 

(e)     None of the above

(d)    All of the above

CH 13

      Which of the following statements is true?

(a)     The quality of the management of a MNC improves as the number for financial reports increases

(b)    If decision making in a MNC is decentralized, so is control

(c)     Control is directly related to the number of financial reports that corporate headquarters receives from its foreign subsidiaries – more reports result in more control and fewer reports result in less control

(d)    Goal congruence is reduced when subsidiary managers are evaluated based on the performance that results from their decisions 

(e)     Research studies have shown that cultural and political differences across countries pose no barriers to uniform reporting within a MNC

(b)    If decision making in a MNC is decentralized, so is control

CH 13

      Which of the following statements is correct?

(a)     For the profit center to work effectively, subsidiary managers must have the authority to make all decisions that affect their profits

(b)    Profit center approach is always better than cost center approach

(c)     Delegating responsibility, without delegating the authority to make the major decisions that affect profitability, enhances goal congruence

(d)    All of the above 

(e)     None of the above

(a)     For the profit center to work effectively, subsidiary managers must have the authority to make all decisions that affect their profits

CH 13

(e)     All of the above

CH 13

      Which item from the following list is least relevant to foreign subsidiary assessment?

(a)     Product adaptation to foreign markets

(b)    Local availability of borrowed funds

(c)     Human resources available to the foreign subsidiary

(d)    Local attitudes toward alien managers 

(e)     The language of the country where the foreign subsidiary operates

(e)     The language of the country where the foreign subsidiary operates

CH 13

      Which of the following factors is NOT considered in performing the environmental analysis phase of strategy formulation?

(a)     Competitors

(b)    Government regulations

(c)     Core competencies 

(d)    Customer demand

(c)     Core competencies

CH 13

      The profit center concept does not work very well with foreign subsidiaries because

(a)     Of geographic proximity

(b)    Of geographic dispersion

(c)     Of hostile attitudes of host governments

(d)    The parent is unwilling to give decision making authority to the foreign manager 

(e)     Foreign managers are not in a position to make informed decisions about their subsidiaries

(d)    The parent is unwilling to give decision making authority to the foreign manager

CH 13

      Determining a firm’s long-term goals and objectives, adopting courses of action, and allocating resources required to achieve goals is a process called:

(a)     Strategy formulation

(b)    Strategic planning

(c)     Strategy implementation 

(d)    Capital budgeting

(b)    Strategic planning

CH 13

      How is goal congruence achieved in decentralized organizations?

(a)     Forcing managers to take on corporate goals as their personal goals

(b)    Creating incentives for managers to make decisions that are consistent with corporate goals

(c)     Setting policies that direct managers in the way decisions should be made 

(d)    Eliminating the authority for divisional managers to make operating decisions

(b)    Creating incentives for managers to make decisions that are consistent with corporate goals

CH 13

      Which of the following nonfinancial criteria do U.S. MNCs view as the least important in evaluating the performance of their foreign operations?

(a)     Community service

(b)    Increased market share

(c)     Productivity improvement

(d)    Relationship with host government 

(e)     Equality control

(a)     Community service

CH 13

      According to surveys in the U.S. and the United Kingdom, what are the most frequently used financial performance measures by multinational organizations?

(a)     Stock price, return on investment, profit

(b)    Budgeted profit vs. actual profit, stock price, sales

(c)     Budgeted profit vs. actual profit, return on investment, profit 

(d)    Internal rate of return, profit, return on investment

(c)     Budgeted profit vs. actual profit, return on investment, profit

CH 13

      Headquarters requires the manager of Foreign Subsidiary A to buy component parts from Foreign Subsidiary B at a price predetermined by headquarters. In this situation, it is most reasonable to hold the manager of Foreign Subsidiary B responsible for

(a)     Revenues

(b)    Costs

(c)     Gross profit

(d)    Net income 

(e)     Return on investment

(b)    Costs

CH 13

      In which of the following situations should a manager not be held responsible for fluctuations in foreign exchange rates?

(a)     Budget at projected rate, evaluate at actual rate when evaluation performed

(b)    Budget at actual rate when budget formulated, evaluate at actual rate when evaluation performed

(c)     Budget at actual rate when budget formulated, evaluate at actual rate when budget formulated

(d)    All of the above 

(e)     None of the above

(c)     Budget at actual rate when budget formulated, evaluate at actual rate when budget formulated

CH 13

      Translation is necessary (from the perspective of U.S. headquarter):

(a)     To communicate in U.S. dollars

(b)    To evaluate the foreign subsidiary’s performance in local currency

(c)     To evaluate capital budgeting decisions in local currency

(d)    To prepare budgets in local currency 

(e)     None of the above

(a)     To communicate in U.S. dollars

CH 13

      When developing a performance evaluation system for an MNC

(a)     U.S. dollars should be used to evaluate performance

(b)    Projected exchange rates should be used to develop the budget, and actual rates should be used to track the budget

(c)     The performance of the manager should never be separated from that of the subsidiary

(d)    All of the above 

(e)     None of the above

(b)    Projected exchange rates should be used to develop the budget, and actual rates should be used to track the budget

CH 13

      In choosing the appropriate currency to measure a foreign subsidiary’s performance, the following factor or factors are considered:

(a)     Which country has the strongest currency

(b)    The subsidiary’s role in the company’s overall strategy

(c)     Whether foreign currency risk management is decentralized 

(d)    Both (b) and (c)

(d)    Both (b) and (c)

CH 13

      MNC headquarter management may have trouble evaluating a foreign subsidiary manager’s performance because

(a)     Top management is not likely to understand all of the peculiarities of each foreign operating environment

(b)    The operating environment is similar to the home country’s, but the climate is different

(c)     Of extreme geographic proximity

(d)    Of a lack of funds to educate headquarter management 

(e)     Of a lack of interest in the foreign subsidiary

(a)     Top management is not likely to understand all of the peculiarities of each foreign operating environment

CH 13

      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

(c)     Currency of the parent company’s home country

CH 13

      Holding managers accountable only for those factors over which they have control is called:

(a)     Management control systems

(b)    Responsibility accounting

(c)     Decentralization 

(d)    Centralization

(b)    Responsibility accounting

CH 14

      What is the primary role of external auditing in multinational corporations?

(a)     Preparing the annual report to corporate shareholders

(b)    Designing a working system of internal accounting controls

(c)     Assuring that financial statement information is high quality 

(d)    Selecting independent members for the board of directors

(c)     Assuring that financial statement information is high quality

CH 14

      What is the primary role 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

(d)    Monitoring risks and assessing their effect on the company

CH 14

      Why is litigation against external auditors, which is very common in the United States, virtually unknown in Japan?

(a)     Japanese auditors rarely make mistakes in their professional work

(b)    Such litigation is inconsistent with Japanese values of interpersonal harmony

(c)     Japan lacks a sophisticated court system for handling complex cases involving accounting matters 

(d)    External auditors are not responsible for the quality of work performed for a corporate client

(b)    Such litigation is inconsistent with Japanese values of interpersonal harmony

CH 14

      What is the focus of Section 404 of the Sarbanes-Oxley Act?

(a)     Requirement that all members of the board of directors be independent of the corporation

(b)    It addresses the need for a consistent set of international auditing standards

(c)     Attesting to the reliability of internal controls in the annual report 

(d)    This defines the membership in the Public Company Accounting Oversight Board (PCAOB)

(c)     Attesting to the reliability of internal controls in the annual report

CH 14

      Why is international harmonization of auditing standards important?

(a)     To be consistent with harmonized international accounting standards

(b)    To ensure the independence of external auditors of multinational corporations

(c)     To assure international capital markets that auditing has been consistent across companies 

(d)    To reduce the authority of individual governments to enact accounting laws

(c)     To assure international capital markets that auditing has been consistent across companies

CH 14

      What group is responsible for developing international auditing standards?

(a)     International Accounting Standards Board (IASB)

(b)    International Auditing and Assurance Standards Board (IAASB)

(c)     International Organization of Securities Commissions (IOSCO) 

(d)    Organization for Economic Cooperation and Development (OECD)

(b)    International Auditing and Assurance Standards Board (IAASB)

CH 14

      Which of the following is the responsibility of an audit committee?

(a)     Oversee the internal control system

(b)    Oversee internal auditing and the independent public accounting function

(c)     Monitor the financial reporting process

(d)    All of the above

(d)    All of the above

CH 14

      What is an audit committee?

(a)     It is a group of audit firms that develop national or international standards for auditing practice

(b)    It is a subset of a corporate board of directors with oversight of the auditing function

(c)     It is the team of external auditors (i.e. CPAs) that conducts audit testing and prepares the audit report

(d)    It is a management group responsible for negotiating the audit engagement with a public accounting firm

(b)    It is a subset of a corporate board of directors with oversight of the auditing function

CH 14

      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

(c)     Board of directors

CH 14

      Under Securities and Exchange Commission regulations, who may be a member of an audit committee for a listed company?

(a)     Any member of the corporate board of directors

(b)    Any member of the corporate board of directors who is not a Certified Public Accountant (CPA)

(c)     Only members of the corporate board of directors who do not have a material interest in the company 

(d)    Any manager or director of the corporation

(c)     Only members of the corporate board of directors who do not have a material interest in the company

CH 14

(a)     It requires all companies, including foreign enterprises, listed on U.S. stock exchanges to have an internal audit function

CH 15

      What is a carbon tax?

(a)     It is a tax imposed by the World Bank on excessive carbon usage

(b)    It is a tax imposed by the U.S. government on excessive vehicle emissions

(c)     It is a regressive tax 

(d)    It is a tax on the use of fuels that cause the emission of carbon dioxide and other greenhouse gases into the atmosphere

(d)    It is a tax on the use of fuels that cause the emission of carbon dioxide and other greenhouse gases into the atmosphere

CH 15

      Which of the following are significant shortcomings with voluntary CSR practices?

(a)     reliability

(b)    bias and a tendency towards being self-laudatory

(c)     minimal disclosure of negative information 

(d)    all of the above

(d)    all of the above

CH 15

      What organization is the only cap and trade system for all six greenhouse gases in North America?

(a)     The Chicago Climate Exchange

(b)    The Toronto Climate Exchange

(c)     The Nuclear Regulatory Agency 

(d)    The Los Angeles Climate Exchange

(a)     The Chicago Climate Exchange

CH 15

      Which country has not ratified the 2005 Kyoto Protocol?

(a)     Japan

(b)    France

(c)     The U.S. 

(d)    Spain

(c)     The U.S.

CH 15

      What is the purpose of the IFAC’s Sustainability Framework?

(a)     To target professional accountant who can influence integration of sustainability into organizations’ objectives, strategies, management, and definition of success

(b)    To promote global adoption GRI

(c)     To target elected officials who can influence integration of sustainability into organizations’ objectives, strategies, management, and definition of success 

(d)    To integrate the concept of sustainability into the Accounting Framework

(a)     To target professional accountant who can influence integration of sustainability into organizations’ objectives, strategies, management, and definition of success

CH 15

      Where is the Secretariat of the GRI located?

(a)     New York

(b)    Montreal

(c)     Amsterdam

(d)    Vienna

(c)     Amsterdam

CH 15

      Part I of the GRI 3 Sustainability Guidelines defines all but which one of the following?

(a)     Report content

(b)    Quality

(c)     Boundary 

(d)    Standards for disclosure

(d)    Standards for disclosure

CH 15

      Part II of the GRI 3 Sustainability Guidelines defines which one of the following?

(a)     Report content

(b)    Quality

(c)     Boundary 

(d)    Standards for disclosure

(a)     Report content

CH 15 

      What does G3 represent?

(a)     An annual summit of countries committed to the reduction of GHGs

(b)    The third type of GHG

(c)     The United States, Canada and Mexico

(d)    The third generation of the GRI’s Sustainability Reporting Guidelines

(d)    The third generation of the GRI’s Sustainability Reporting Guidelines

CH 15 

      To be carbon neutral means that:

(a)     An equal amount of gas has been removed from the atmosphere as has been put there through various emissions

(b)    A company pledges not to produce carbon-based products

(c)     A company has overpaid its carbon tax 

(d)    The type of carbon released into the atmosphere has no negative implications on the environment

(a)     An equal amount of gas has been removed from the atmosphere as has been put there through various emissions

CH 15 

      Part I (Reporting Principles and Standards Disclosures) of the GRI 4 Sustainability Guidelines provides all but which one of the following?

(a)     Reporting principles

(b)    Standard disclosures

(c)     Criteria to be applied by an organization to prepare its sustainability report ‘in accordance’ with the guidelines 

(d)    Material aspects and their boundaries

(d)    Material aspects and their boundaries

CH 15 

      Part II (Implementation Manual) of the GRI 4 Sustainability Guidelines provides all but which one of the following?

(a)     Explanations of how to apply the reporting principles

(b)    How to prepare the information to be disclosed

(c)     How to interpret the various concepts in the Guidelines 

(d)    Criteria to be applied by an organization to prepare its sustainability report ‘in accordance’ with the guidelines

(d)    Criteria to be applied by an organization to prepare its sustainability report ‘in accordance’ with the guidelines

CH 8

1.      Which of the following is a true statement about foreign currency translation?

(a)     After deciding that costs ware not worth the benefits, the FASB decided to make SFAS #52, Foreign Currency Translation, voluntary

(b)    According to the SFAS #52, the balance sheet of integral foreign subsidiary is translated at year-end exchange rates

(c)     According to the SFAS #52, the current rate method of translation must be used for all foreign subsidiaries

(d)    Foreign currency translation is one issue where substantial comparability has been achieved worldwide 

(e)     Many Japanese companies use a foreign currency translation method that is inconsistent with International Accounting #121, “Accounting for the Effects of Changes in Foreign Exchange Rates.”

(e)     Many Japanese companies use a foreign currency translation method that is inconsistent with International Accounting #121, “Accounting for the Effects of Changes in Foreign Exchange Rates.”

CH 8

1.      The temporal method of foreign currency translation

(a)     Uses historical exchange rates to translate fixed assets and depreciation expense

(b)    Uses the year-end exchange rate to translate cash

(c)     Preserves the historical cost basis of accounting

(d)    Is used by U.S. MNCs to translate the financial statements of “integral” foreign subsidiaries 

(e)     All of the above

(e)     All of the above

CH 8

1.      Using the current rate method to translate the financial statements of a foreign subsidiaries poses the following problem:

(a)     It is incompatible with general price level financial statements presented as supplemental information

(b)    It is compatible with historical cost financial statements

(c)     It is highly  subjective 

(d)    It is incompatible with historical cost financial statements.

(d)    It is incompatible with historical cost financial statements.

CH 8

1.      A piece of land was purchased by a foreign subsidiary on 6/11/2011 for LC (local currency) 2,500.  The exchange rate was 1LC=$1.25.  On 1/1/2011 the exchange rate was 1LC=$1, and on 12/31/2011 (the U.S. parent company’s year-end) the exchange rate was 1LC=$1.4.  The average exchange rate for the 2011 year was 1LC=$1.3.  If the foreign subsidiary is considered to be autonomous under the requirements of SFAS #52, at what U.S. dollar amount will the land be included in the consolidated financial statements at 12/31/2011?

(a)     $2500

(b)    $3125

(c)     $3250

(d)    $3500

(e)     None of the above

(d)    $3500

CH 8

1.      Assume the same facts as in the last question, except that the foreign subsidiary is considered to be integral under the requirements of SFAS #52.  At what U.S. dollar amount will the land be included in the consolidated financial statements at 12/31/2011?

(a)     $2500

(b)    $3125

(c)     $3250

(d)    $3500 

(e)     None of the above

(b)    $3125

CH 8

1.      The reason exchange rates change include:

(a)     Relative interest rates only

(b)    Relative interest rates and inflation rates, balance of payments, and political factors

(c)     Relative inflation rates only

(d)    Relative inflation rates and interest rates 

(e)     Political factors only

(b)    Relative interest rates and inflation rates, balance of payments, and political factors

CH 8

1.      International Accounting Standard #21, “Accounting for the Effects of Foreign Exchange Rates,”

(a)     Requires current rate method to be used

(b)    Requires that the effect s of changes in foreign exchange rates be eliminated in consolidation

(c)     Requires temporal method to be used

(d)    All of the above 

(e)     None of the above

(e)     None of the above

CH 8

1.      The only permissible translation method according to the SFAS #8 (1975) is:

(a)     Current/non-current method

(b)    Current rate method

(c)     Monetary/non-monetary method

(d)    Temporal method 

(e)     None of the above

(d)    Temporal method

CH 8

1.      Of the following methods for translating foreign currency financial statements, which one maintains the underlying valuation method (I.e. historical cost or current value) used by the foreign subsidiary?

(a)     Current rate method

(b)    Current/noncurrent method

(c)     Temporal method 

(d)    Monetary/nonmonetary method

(c)     Temporal method

CH 8

1.      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 may be used under both the temporal and current rate method

(b)    Historical rate

CH 9

1.      Which method was (were) adopted by SFAS #33, Financial Reporting and Changing Prices?

(a)     Constant dollar method

(b)    Current cost method

(c)     General purchasing power accounting method

(d)    Current value accounting method 

(e)     (a) and (b)

1.

(e)     (a) and (b)

CH 9

1.      Which price index is used by constant dollar method?

(a)     CPI-U

(b)    The wholesale price index

(c)     The GNP deflator

(d)    The composite construction cost index 

(e)     None of the above

(a)     CPI-U

CH 9

1.      IAS #29, Financial Reporting in Hyperinflationary Economics, adopts which of the following method?

(a)     Current cost method

(b)    Current value accounting method

(c)     General purchasing power accounting method

(d)    Replacement value accounting method 

(e)     None of the above

(c)     General purchasing power accounting method

CH 9

1.      Which method retains the basis of measurement of assets like historical cost method?

(a)     Current cost method 

(b)    Constant dollar method

(b)    Constant dollar method

CH 9

1.      Which of the following item under current cost accounting method is the same as Net Income on historical-cost based Income Statement?

(a)     Current cost inform from operations

(b)    Realized holding gain

(c)     Realized net income

(d)    Current cost net income 

(e)     Unrealized holding gain

(c)     Realized net income

CH 9

1.      Constant dollar net income equals to:

(a)     Income before purchasing power gain plus purchasing power gains

(b)    Income before purchasing power gain plus realized holding gain

(c)     Current cost income from operations plus realized holding gain

(d)    Realized net income plus unrealized holding gain 

(e)     Realized net income plus unrealized holding gain

(a)     Income before purchasing power gain plus purchasing power gains

CH 9

1.      Under general purchasing power (GPP) accounting method non-financial assets are restated to a common purchasing power, generally, at

(a)     The beginning balance sheet date

(b)    The closing balance sheet date 

(c)     The middle of balance sheet date

(b)    The closing balance sheet date

CH 9

1.      Which of the following is potentially a problem associated with historical cost-based financial statements in periods of inflation?

(a)     Asset understatement

(b)    Overpayment of income taxes

(c)     Overstated income 

(d)    All of the above are potential problems

(d)    All of the above are potential problems

CH 9

1.      Which method of accounting for inflation must be used under U.S. GAAP?

(a)     Current Replacement Cost method

(b)    General Purchasing Power method

(c)     Both Current Replacement Cost and General Purchasing Power methods must be used 

(d)    Neither method must be used since inflation accounting is not required under U.S. GAAP

(d)    Neither method must be used since inflation accounting is not required under U.S. GAAP

CH 9

1.      What issue of reporting effects of changing prices is addressed by IAS 29, issued by the International Accounting Standards Board in 1989?

(a)     Choice between current replacement cost and general purchasing power method

(b)    Making inflation-adjusted reporting optional or required

(c)     Specifying the European Central Bank as the official source of inflation rates in the European Union 

(d)    Mandating inflation adjustments for primary financial statements of companies in hyperinflationary economies

(d)    Mandating inflation adjustments for primary financial statements of companies in hyperinflationary economies

CH 9

      Which of the following statements is false?

(a)     Disclosures that are required in one country may be voluntary in another

(b)    Requirements for disclosures in one country encourage voluntary disclosures in other countries

(c)     Raising capital internationally encourages increased levels of voluntary disclosure

(d)    When companies are required to disclose certain types of information, they compensate by voluntarily disclosing less other types of information

(e)     All of the above

(d)    When companies are required to disclose certain types of information, they compensate by voluntarily disclosing less other types of information

CH 9

      Financial forecast disclosures

(a)     Are the company’s own forecasts of future profitability and cash flow

(b)    Are common by international norms

(c)     Are provided when investors sue companies for them

(d)    Are normally more reliable than relevant 

(e)     All of the above

(a)     Are the company’s own forecasts of future profitability and cash flow

CH 9

      Information about shares and shareholders

(a)     Is now a common disclosure among large multinational corporations

(b)    Normally includes the identities of all shareholders

(c)     Normally includes data about share price trends

(d)    Is useful for identifying persons interested in buying a company’s shares 

(e)     None of the above

(c)     Normally includes data about share price trends

CH 9

      Which of the following is true statements about FASB Statement #131, “Disclosures about Segments of an Enterprise and Related Information”?

(a)     It is based on International Accounting Standard #14, “Reflecting Financial Information by Segments”

(b)    It is based on the way management organizes segments internally to make operating decisions and assess performance

(c)     U.S. companies that provide financial information by segments are exempt from providing consolidated financial statements

(d)    It requires U.S. companies to define three product lines and three geographic areas 

(e)     The FASB made it voluntary after deciding that the costs of preparing and reporting the information were not worth the benefits

(b)    It is based on the way management organizes segments internally to make operating decisions and assess performance

CH 9

      Which of the following is a reason for disclosing financial statement information “disaggregated” by geographic area?

(a)     To identify a dependency of a company’s profits on various product lines

(b)    To comply with the accounting pronouncements of the International Committee on Accounting Procedures

(c)     To show employee all over the world that they are being adequately compensated

(d)    To allow the company to prepare financial statements in many languages and currencies 

(e)     To better assess the risks and opportunities faced by the company from operating in various regions of the world

(e)     To better assess the risks and opportunities faced by the company from operating in various regions of the world

CH 9

      Under IAS 27, how is “control” defined?

(a)     Ownership of 50% or more of the voting shares of another Entity

(b)    Representation on another entity’s board of directors

(c)     The power to govern financial and operating policies of an entity 

(d)    Ownership of 30% or more of the voting shares of another entity

(c)     The power to govern financial and operating policies of an entity

CH 9

      How does U.S. GAAP differ from IFRS with respect to presenting consolidated financial statements?

(a)     U.S. GAAP requires all controlled subsidiaries to be consolidated, whereas IFRS allows for optional consolidated financial statements

(b)    IFRS excludes subsidiaries acquired for disposal within one year from the consolidation requirement, whereas U.S. GAAP requires all controlled subsidiaries to be consolidated

(c)     U.S. GAAP allows a company to exclude subsidiaries it is holding for sale from the consolidation process 

(d)    IFRS requires the parent company to own 50% of the voting shares of the subsidiary before consolidation is allowed

(b)    IFRS excludes subsidiaries acquired for disposal within one year from the consolidation requirement, whereas U.S. GAAP requires all controlled subsidiaries to be consolidated

CH 9

      Under U.S. GAAP and IASB standards, the threshold for determining “significant influence” in an associate enterprise is:

(a)     50% ownership of voting shares

(b)    5% ownership of voting shares

(c)     20% ownership of voting shares 

(d)    10% ownership of voting shares

(c)     20% ownership of voting shares

CH 9

      IFRS #8 adopts which approach to report segmented financial information?

(a)     Geographic approach

(b)    Business lines approach

(c)     Management approach

(d)    Asset test approach 

(e)     Risks and rewards approach

(c)     Management approach

CH 9

      Identify the false statement:

(a)     Value added statement is required by U.S. GAAP

(b)    Accounting measurement issues are more important than disclosure issues

(c)     Accounting measurement issues are more controversial than disclosure issues

(d)    Disclosure ideas are limited only by the imagination of accountants and corporate managements 

(e)     U.S. GAAP requires environmental disclosures

(a)     Value added statement is required by U.S. GAAP

CH 11

      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

(b)    Minimize worldwide taxes paid, within the limitations of applicable tax law

CH 11

      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

(c)     This is a period of time when corporations are relieved of paying various taxes

CH 11

      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 worldwide tax is eliminated 

(d)    Locations that provide tax-based incentives to corporations

(a)     A jurisdiction where taxes are abnormally low

CH 11

      In addition to having very low effective tax rates, which of the following is also a characteristic of tax havens?

(a)     Lack of transparency in financial reporting

(b)    Lack of effective exchange of information

(c)     Absence of substantial activities requirement 

(d)    All of the above

(d)    All of the above

CH 11

      Jane, a citizen of Country X, received a corporate dividend in the amount of £10,000 from a company in the U.K. Country X taxed Jane’s dividend as ordinary income. Country X is using what kind of approach toward foreign source income?

(a)     Territorial approach

(b)    Worldwide approach

(c)     Legalistic approach 

(d)    None of the above

(b)    Worldwide approach

CH 11

      What causes double taxation?

(a)     A taxpayer being subject to tax laws in multiple jurisdictions

(b)    Profits increasing excessively from year to year

(c)     Penalties imposed by a taxing authority for non-payment of taxes 

(d)    None of the above

(a)     A taxpayer being subject to tax laws in multiple jurisdictions

CH 11

      What is the meaning of “tax system neutrality?”

(a)     Taxes should be minimized

(b)    Tax systems should not be a major factor in business decisions

(c)     Tax policies should be unbiased 

(d)    Taxes in one jurisdiction are offset by tax credits in another jurisdiction

(b)    Tax systems should not be a major factor in business decisions

CH 11

      What term is used to describe foreign corporation in which U.S. shareholders hold more than 50% of the voting power or fair market value of the corporation’s stock?

(a)     Branch

(b)    Holding company

(c)     Controlled foreign corporation 

(d)    Tax-exempt foreign corporation

(c)     Controlled foreign corporation

CH 11

      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

(b)    Some income of the CFC is taxed by the U.S. in the year it is earned rather than when dividends are received

CH 11

      What is “Subpart F” income?

(a)     All foreign source income

(b)    Foreign income that is not taxable by foreign jurisdictions

(c)     Income that is easily moved to tax havens 

(d)    Foreign source income that is exempt from U.S. taxation

(c)     Income that is easily moved to tax havens