translation of foreign currencies

At what exchange rate are revenues and accounts receivable translated under the current rate method? Revenues ---- Accounts receivable A) Average rate ---Current rate B) Current rate ----Current rate C) Average rate ---Historical rate

A is correct

Errors that affect multiple financial statement elements are most likely to arise from: A) measurement and timing issues. B) classification issues. C) compound issues.

A is correct

If the foreign currency is appreciating, translated mixed ratios will be ___________ then the original ratio A.) smaller B.) larger

A is correct

KNOW FOR EXAM!! ----------------------------------------------------------------------- which of the following is most accurate? A.) cash backed earnings are perceived as HIGH quality and accrual based earnings are perceived as LOW quality. B.) cash backed earnings are perceived as LOW quality and accrual based earnings are perceived as HIGH quality

A is correct

Revenues are translated at __________________ rate under both the temporal method and under the current rate method. A.) Average Exchange Rate B.) Current exchange rate C.) Historical exchange rate

A is correct

This is refereed to as the weighted average of all loss outcomes that exceed the vAR loss A.) Conditional VAR B.) Unconditional VAR C.) Relative VAR

A is correct Conditional VAR is also referred to as expected tail los or expected shortfall

True or False Nonmonetary items are NOT exposed to purchasing power gains or losses during inflation.

True monetary items are exposed to gains and losses non-monetary items are not exposed

Sustainable earnings are most likely to be driven by: A) Conservative revenue recognition practices. B) Accruals element of earnings. C) Cash flow element of earnings.

C is correct Sustainable and persistent earnings are driven by cash flow element of earnings. The stability and accuracy of earnings forecasts can be reduced by estimation process that generates the accruals component of earnings. Conservative and aggressive revenue recognition practices both would result in reversion in earnings (and hence lowers the sustainability of earnings).

Which of the following statements is most accurate regarding foreign currency translation? Under the: A) temporal method, the monetary asset accounts of a foreign subsidiary are translated using the current rate. B) temporal method, the nonmonetary asset accounts of a foreign subsidiary are translated using the current rate. C) current rate method, all balance sheet accounts of a foreign subsidiary are translated using the average rate.

A is correct

The actuarial present value of all future pension benefits earned to date, based on expected future salary increases, is called the: A) projected benefit obligation (PBO). B) total projected pension cost. C) pension liability.

A is correct Pension cost is periodic and not total projected. Pension liability is the net amount of PBO and fair value of plan assets.

which method is appropriate if the subsidiary is well integrated with the parent A.) Temporal Method B.) Current Rate Method

A is correct when the parent and subsidiary are well integrated Temporal is generally used

Galaxy Company recognized a restructuring charge in its year-end income statement. Similar restructuring charges have occurred in the past. In addition, Galaxy recognized an extraordinary loss. Galaxy uses the term "operational earnings" when discussing its financial results. According to Galaxy, "operational earnings" excludes special nonrecurring transactions such as restructuring charges, discontinued operations, and extraordinary items. Should the restructuring charge and extraordinary loss be included or excluded from "operational earnings" for analytical purposes? A) Both are excluded. B) One is included. C) Both are included.

B is correct The restructuring charge does not appear to be nonrecurring; thus, it should be included in "operational earnings." By definition, an extraordinary loss is unusual in nature and infrequent in occurrence. Therefore, the extraordinary loss should be excluded from "operational earnings."

The least valuable source of information about a businesses' risk is: A) Auditor's report. B) Notes to financial statements. C) Management discussion and analysis section of the annual report.

A is correct Because an audit report provides only historical information, such a report's usefulness as an information source is limited. Companies are required to make certain risk related disclosures in the notes to financial statements. Both GAAP and IFRS require companies to disclose risks related to pension benefits, contingent obligations and financial instruments. Ideally, companies should include principal risks that are unique to the business (as opposed to risks faced by most businesses) in their MD&A.

Barkley Corporation, a wholly-owned subsidiary of a U.S. firm, is located in a country that is experiencing hyperinflation. Barkley's functional currency and the parent's presentation currency differ. What exchange rate should be used to convert Barkley's intangible assets into U.S. dollars according to U.S. GAAP? A) Historical rate. B) Current rate. C) Prime rate.

A is correct In an inflationary environment, the temporal method is required under U.S. GAAP, even if the functional currency and the parent's presentation currency differ. Under the temporal method, inventory, fixed assets, and intangible assets are remeasured at the historical rate; that is, the actual rate when the assets were purchased.

This is the currency in which the firm generates revenue in: A.) Functional currency B.) Local currency C.) Presentational currency "Reporting Currency"

A is correct presentational currency = This is the currency in which a multi-national firm prepares it's financial statements: local currency = This is the currency of country in which the foreign subsidiary subsidiary is located:

The *translation* method of translating the financial statements of a foreign subsidiary to the parent's presentation (reporting) currency involves the ________________ method A.) Current Rate B.) Temporal

A is correct the current rate method is involved with the translation method the temporal rate method is involved with the remeasuremnt method.

a _______________ discount rate reduces the value of PBO and hence improves the funded position reflected on the balance sheet. A.) higher B.) lower

A is correct the discount rate and then vale of PBO have inverse relationships.

A _____________ratio combines inputs from both the income statement and balance sheet. A.) Pure B.) Mixed

B is correct

If the foreign currency is depreciating, translated mixed ratios will be ___________ then the original ratio A.) smaller B.) larger

B is correct

Which if the following IS NOT one of the three ratios that make up the computation of ROE? A.) Asset Turnover B.) Net profit Margin C.) Current Ratio D.) Financial Leverage

C is correct ROE = NI/REV * asset turnover * financial leverage ROE = Net profit margin * rev/average assets * average asset/ average stock holders equity

Which of the following measures is unaffected by the choice between translation under the current rate method and remeasurement under the temporal method? A) Equity. B) Cost of goods sold. C) Tax expense.

C is correct Taxes are converted at the same rate (average rate) under both methods. Equity under the temporal method is a mixed rate whereas under the current rate method it is at the current rate. COGS under the temporal method is at the historical rate and under the current rate method it is at the average rate.

The failure to recognize inventory obsolescence is an example of ___________. A) Understating expenses. B) Delaying expenses. C) Misclassifying expenses.

A is correct Inventory must be tested for obsolescence using the lower-of-cost-or-market method. Obsolete inventory must be written down (expensed) in the income statement which results in lower earnings. Thus, failure to recognize obsolescence understates expenses and overstates earnings.

Organic growth in sales is most accurately defined as growth in sales excluding the effects of: A) acquisitions/divestitures and currency value fluctuations. B) acquisitions/divestitures only C) currency value fluctuations only

A is correct Organic growth in sales is defined as growth in sales excluding the effects of acquisitions/ divestitures and currency effects.

Inventories are listed on the balance sheet at $600,000, retained earnings are $1.9 Million. In the notes to financial statements, you find a LIFO reserve of $125,000. Also, the probability of a LIFO liquidation is high. Assuming a tax rate of 36%, what will be the adjusted value of retained earnings? A) $1,980,000.00 B) $1,820,000.00 C) $1,855,000.00

A is correct The highly probably LIFO liquidation suggests net income, income tax expense, and equity will rise. The analyst can make this adjustment now for forecasting purposes. The adjustment to retained earnings will be: $125,000 × (1 − 0.36).

with regards to using the use the Beneish model A depreciation index LESS THAN 1 indicates? A.) the company is depreciating assets at a higher rate than prior years B.) the company is depreciating assets at a lower rate than prior years

B is correct

Under U.S. GAAP, the ______________method is required when the subsidiary is operating in a hyper-inflationary environment. A.) current rate B.) temporal C.) translation method

B is correct the temporal method and the remeasurement method are basically the same.

The _______________ tax rate is the tax expense in the income statement divided by pretax profit A.) Stated B.) Effective C.) Statutory

B is correct Statutory tax rate is provided by the tax code of the home country stated tax rate is not something tested within the curriculum

if the days of sales outstanding is INCREASING this is a sign that? A.) firm is paying suppliers more slowly B.) A/R is taking more time to be collected C.) A/R is being collected in a quicker manner

B is correct if DSO is increasing that means A/R is taking longer to be collected if DSO is decreasing that means A/R is being collected in a quicker manner

a reportable business or geographic segment of a company is considered if a it represents at least 10% of either of the following except? A.) Assets B.) Liabilities C.) Earnings D.) Revenue

B is correct it is to be reported as a individual business segment is it is either 10% of earnings 10% of revenue or 10% of assets only has to be one not all three

The "reporting" currency of a firm is also referred to as A.) Functional currency B.) Local currency C.) Presentational currency

C is correct

This is the currency in which a multi-national firm prepares it's financial statements: A.) Functional currency B.) Local currency C.) Presentational currency "Reporting Currency"

C is correct

Which of the following ratios is unaffected by the choice between the current rate method and the temporal method? A) Current ratio. B) Accounts payable turnover. C) Quick ratio.

C is correct

another term for "Ex-Ante" tracking error is A.) Conditional VAR B.) Unconditional VAR C.) Relative VAR

C is correct

this is a portfolio with a sensitivity of one factor set to one and a sensitivity of 0 to all other factors A.) Market portfolio B.) Tracking portfolio C.) Factor portfolio

C is correct

Which of the following general statements is CORRECT with respect to the temporal method? Revenues and operating expenses (excluding COGS) are translated at the: A) historical rate. B) current rate. C) average rate.

C is correct As a general rule for the temporal method, all revenues and operating expenses (excluding COGS) are translated using the average rate.

In order to decrease the projected benefit obligation (PBO) of a pension plan, which of the following changes in pension assumptions can be made to yield the desired result? A) Increase the expected rate of return. B) Decrease the discount rate. C) Decrease the rate of compensation growth.

C is correct discount rate and PBO have INVERSE relationship increasing expected return has no impact on PBO

expected tail loss is also referred to as? A.) Unconditional VAR B.) relative VAR C.) Conditional VAR

C is correct This is also called expected shortfall Relative VAR is the ex-ante error tracking conditional VAR also means expected tail loss the degree which performance MIGHT BE EXPECTED to deviate from the benchmark.

if the days of sales outstanding is DECREASING this is a sign that? A.) firm is paying suppliers more slowly B.) A/R is taking more time to be collected C.) A/R is being collected in a quicker manner

C is correct if DSO is increasing that means A/R is taking longer to be collected if DSO is decreasing that means A/R is being collected in a quicker manner

If the functional currency and the parent's presentation currency are DIFFERENT, the _________________ method is used to translate the subsidiary's financial statements A.) Remeasurement method B.) Temporal Rate C.) Current Rate

C is correct the temporal rate and the remeasurement method are the same.

which method refers to the instance where the functional currency = the local currency? A.) Current Rate Method B.) Remeasurement method C.) Translation metod D.) A & C are correct E.) B & C are correct

D is correct the method referred to is the translation method which uses the current rate method to be completed.

what are the three components of cash conversion cycle?

Days of Sales outstanding (DSO) Days of inventory outstanding (DIO) & Days payable outstanding (DPO_

_____________ is the measure of a the approximate sensitivity of a security to change in interest rates A.) Value at Risk B.) Duration C.) convexity

Duration

which method refers to the instance where the functional currency = the presentation currency? A.) Current Rate Method B.) Temporal method C.) Remeasurement method D.) Translation method E.) B & C are correct F.) A & D are correct

E is correct The remeasurement method is the instance where the functional currency = the presentation currency. the remeasurement method uses the temporal method to be completed.

True or False Monetary items are NOT exposed to purchasing power gains or losses during inflation

False non monetary items are not exposed to gains or losses resulting from inflation monetary items ARE exposed to gains and losses

True or False A LIFO liquidation involves selling more goods than are replaced.

True

True or false OCF and CFO are synonymous

True operating cash flow and cashflow from operations are the same

The closer operating cash flow is to earnings the (lower/higher) quality the earnings are considered to be

higher when they are far apart it is common to perceive this as low quality of earnings.

"high quality" cash flow is defined as being ________________, ________________ and ______________

positive & sustainable, adequate adequate means ability to cover capital expenditures, dividends and debt repayments.

Alex Fisher, CFA, is examining the phenomenon of mean reversion on the earnings of several firms. Which of the following statements regarding mean reversion is least accurate? A) High earnings should not be expected to continue indefinitely. B) Low earnings should not be expected to continue indefinitely. C) Normal earnings should not be expected to continue indefinitely.

C is correct When examining net income, analysts should be aware that earnings at extreme levels tend to revert back to normal levels over time. This phenomenon is known as mean reversion. As a result of mean reversion, analysts must understand that extreme earnings (high or low) should not be expected to continue indefinitely.

The financial statements of Pace Industries issued over the past five years show a progressively increasing net difference between the value of its pension fund and the projected future pension liability on the balance sheet. Pace most likely offers which of the following types of pension plans to its employees? A) A 401(k) plan. B) A defined benefit plan. C) A defined contribution plan.

B is correct A company with a defined benefit plan will fund a portfolio structured to fulfill future pension obligations. The difference between the current value of the assets and the projected future liability is shown as a net amount on the balance sheet.

which of the following is NOT a characteristic of "high quality cash flow? A.) cash flow is adequate to cover capital expenditures, dividends, and debt repayments B.) complete, unbiased and clearly presented C.) cash flow is positive and sustainable

B is correct B is referring to what a high quality balance sheet requires. A &C are the main two characteristics of high quality cash flow.

A firm seeking to lower current tax liability may elect to use which method of inventory valuation during an inflationary period? A) FIFO. B) LIFO. C) Average cost.

B is correct During a inflationary period, using LIFO would increase COGS, since the most recent (highest cost) inventory would be sold. Therefore, earnings and taxes would be lowest under LIFO.

Which one of the following choices is least likely to be an indicator of poor-quality earnings? A) Restatement of previously issued financial statements. B) Reported earnings handily beat analyst estimates. C) An investigation by the market regulatory authority is initiated.

B is correct Enforcement actions by regulatory authorities and restatements of previously issued financial statements are two (external) indicators of poor-quality earnings. Earnings that meet or narrowly beat analyst estimates are considered to be suspect for poor quality. Handily beating analyst estimates is not considered to be an indicator of poor-quality earnings.

Wes Livingston is the founder and CEO of Bigwell Corporation. Livingston is interested in Bigwell being acquired by a larger competitor and wants to have his company's financial statements appear as attractive as possible to a potential suitor. In order to decrease the projected benefit obligation (PBO) of the company's pension plan, which of the following changes in actuarial assumptions could be made? A) Decrease the discount rate. B) Increase the discount rate. C) Increase the rate of compensation growth.

B is correct Increasing the assumed discount rate of a pension plan will result in lower projected benefit obligation (PBO). Increasing rate of compensation growth and decreasing discount rate would increase the PBO.

Which of the following statements is CORRECT when inventory prices are falling? A) LIFO results in higher COGS, lower earnings, higher taxes, and higher cash flows. B) LIFO results in lower COGS, higher earnings, higher taxes, and lower cash flows. C) LIFO results in lower COGS, lower earnings, lower taxes, and higher cash flows.

B is correct Remember, prices are falling. Under LIFO, the most recent purchases flow to COGS. So, LIFO results in lower COGS, higher earnings, higher taxes, and lower cash flows.

Statutory tax rate = 35.0% Effect of disallowed provisions = 2.0% Effect of taxes in foreign jurisdictions = (1.9%) Other = 0.3% Effective tax rate = 35.4% Due to its foreign operations, Suparna's effective tax rate was most likely: A) higher than the prior year's effective tax rate. B) lower than its statutory tax rate. C) higher than the statutory tax rate.

B is correct Suparna's effective tax rate was lowered by 1.9% due to the effect of taxes in foreign jurisdictions.

Total Periodic Pension Cost (TPPC) is most likely to: A) be reported on the income statement. B) be computed the same under IFRS and US GAAP. C) take into account expected return on plan assets.

B is correct TPPC is the true (i.e., economic) cost of the pension plan; it does not change depending on the accounting system chosen. TPPC uses actual return on plan assets: it is not impacted by our expectations. TPPC is not reported in the income statement.

Tiny Company, a subsidiary of Large Corporation, operates in a country that is experiencing hyperinflation. Assuming Large follows IFRS, which of the following exposures will result in a net purchasing power GAIN? A) Nonmonetary assets and current liabilities. B) Monetary liabilities. C) Nonmonetary assets and nonmonetary liabilities.

B is correct non monetary items are not exposed to gains or losses resulting from inflation monetary assets = net purchasing power LOSS monetary liabilities = net purchasing power GAIN

(Assume U.S. GAAP for this question.) For a subsidiary in a hyperinflationary economy, the functional currency should be the: A) Local currency. B) Parent's currency. C)Subsidiary's operating currency.

B is correct parents currency is synonymous with presentational currency The functional currency should be the parent's currency. Under IFRS, the firm would restate the financials for inflation, and then translate under the current rate method.

The *remeasurement* method of translating the financial statements of a foreign subsidiary to the parent's presentation (reporting) currency involves the ________________ method A.) Current Rate B.) Temporal

B is correct the current rate method is involved with the translation method the temporal rate method is involved with the remeasuremnt method.

which method is appropriate if the subsidiary operates relatively independently of the parent A.) Temporal Method B.) Current Rate Method

B is correct the current rate method is used typically if the parent and subsidiary operate independently.

Which of the following general statements is most accurate with respect to the current rate method? Revenues: A) and operating expenses are translated at the current rate. B) are translated at the average rate while operating expenses are translated at the current rate. C) and operating expenses are translated at the average rate.

C is correct As a general rule for the current rate method, all revenues and operating expenses are translated using the average rate.

Mazeppa, Inc., is a multinational firm with its home office located in Toronto, Canada. Its main foreign subsidiary is located in Paris, but the primary economic environment in which the foreign subsidiary generates and expends cash is in the United States (New York). The: A) local currency is the U.S. dollar. B) functional currency is the euro. C) presentation (reporting) currency is the Canadian dollar.

C is correct As a multinational firm, the location of Mazeppa's head office would most likely determine the currency to be used to prepare its final, consolidated financial statements. Since Mazeppa's is located in Canada, the presentation currency is likely the Canadian dollar. Based on the facts, the local currency is the euro and the functional currency is the U.S. dollar.

In a hyperinflationary economy, translation under the current rate method will most likely result in relatively: A) high balance sheet values for long term assets. B) high translation gains. C) low balance sheet values for long term liabilities.

C is correct In a hyperinflationary economy, translation under the current rate method will most likely result in relatively low balance sheet values for assets and liabilities. Translation losses will also occur.

Which of the following is least likely an indicator of biased measurement in assessing balance sheet quality? A) Understatement of valuation allowance for deferred tax assets. B) Understatement of inventory impairment charges. C) Presence of substantial goodwill on balance sheet.

C is correct Presence of substantial goodwill does not inherently make it biased measurement. Only if the value of goodwill is unjustified (based on market values of the investments), would the measurement be considered biased. Understatement of inventory impairment charges overstates value of inventory. Similarly understatement of valuation allowance for deferred tax assets overstates the value of deferred tax assets.

According to U.S. GAAP, goodwill is most likely to be considered impaired if the reporting unit's: A) carrying value (including goodwill) is less than its fair value. B) implied value of goodwill is less than book value of goodwill. C) carrying value (including goodwill) is greater than its fair value.

C is correct To test goodwill for impairment under U.S. GAAP, the carrying value of the reporting unit (including goodwill) is compared to the fair value of the reporting unit. After an impairment has been detected, the loss is calculated as the difference between the book value of goodwill and the implied value of goodwill.

In reality, what best describes the real value of non-monetary assets and liabilities in a hyperinflationary environment? A) All non-monetary accounts are re-measured at the current rate. B) Typically not affected because their local currency-denominated values decrease to offset the impact of inflation. C) Typically not affected because their local currency-denominated values increase to offset the impact of inflation.

C is correct Typically not affected because their local currency-denominated values increase to offset the impact of inflation (i.e., real estate values typically rise with inflation).

Current U.S. GAAP pension accounting standards require public companies to report which of the following in the balance sheet? A) The expected return on plan assets. B) The pension liability adjusted for unrecognized items. C) The funded status of the plan.

C is correct

What are the two methods of accounting for foreign operations?

Translation and remeasurement translation method is also referred to as the current rate method. the remeasurement method is also refered to as the temporal rate method.

Consider the following..... offer price = $20 bid price = $17 what is the ask price?

ask is $17 this is because the ask = bid

Financial analysts can use select data from a company's financial statements to derive total periodic pension cost in order to better reflect the company's true economic pension cost. Which of the following formulas will most accurately calculate a company's true pension expense? A) Beginning fair value of plan assets + service cost + interest cost - ending fair value of plan assets. B) Service cost + interest cost + plan amendments - actual return on plan assets. C) Service cost + interest cost - actual return on plan assets - benefits paid.

B is correct The total periodic pension cost, (absent any information on changes in actuarial assumptions) is calculated without reflecting the amortization of unrecognized items and other smoothing mechanisms included in reported pension expense, and in addition uses the plan's actual return on assets, rather than the plan's expected return.

Under current U.S. GAAP, the assets and liabilities of a defined benefit pension plan are: A) reported in the appropriate section of the balance sheet, with pension obligations shown under liabilities and plan assets shown under assets. B) netted against each other, and only the net asset or liability amount is reported on the company's balance sheet. C) off balance sheet items which are shown only in the footnotes.

B is correct Under current U.S. GAAP, companies are required to report only the net asset or liability amount. They cannot show assets and liabilities separately. Although some smoothing details are still disclosed in the footnotes, all major components of pension assets and liabilities are now required to be shown on the balance sheet.

_______________ is a measure of how sensitive the an options delta is to a change in the underlying A.) Vega B.) Gamma C.)

B is correct Vega = a change in a given derivative instrument given a small change in volatility

Aggergate accruals ratio (19) = 19% Aggergate accruals ratio (20) = 17% Aggergate accruals ratio (21) = 15% which of the following is true A.) earnings quality is deteriorating over time B.) earnings quality is improving over time C.)

B is correct decreasing accruals ratio means company's earnings quality is improving

Which of the following is least likely an indicator of high-quality cash flow? A) OCF derived from sustainable sources. B) Total cash flow that is positive and high. C) OCF adequate to cover capital expenditures, dividends and debt repayments.

B is correct high quality cash flow is defined as positive, adequate and sustainable nothing is specified about it being "high"

(Write up in practice problems) A U.S. firm owns a foreign subsidiary in France. In 2002, sales were EUR 1,000,000 and the USD/EUR exchange rate was 1.0620. In 2003, sales were EUR 1,100,000 and the exchange rate was 1.1417. What is the impact of the change in the value of the USD on the parent company's translated sales? A) Sales will increase by 18.25%. B) Sales will decrease by 7.5%. C) Sales will increase by 7.5%.

C is correct The increase in sales due to the appreciating EUR is measured as 7.5% [= (1.1417 / 1.0620) − 1]. Sales for the subsidiary rose 10% [= (1,100,000 / 1,000,000) - 1] in the local currency (EUR). After translation the parent firm will report sales of USD 1,062,000 (= EUR 1,000,000 × 1.0620) for 2002 and USD 1,255,870 (= EUR 1,100,000 × 1.1417) for 2003. Growth measured from the parent's perspective suggests sales rose 18.25% [= (1,255,870 / 1,062,000) − 1], but this includes the growth rate in sales measured in the local currency and the rate of appreciation in the foreign currency, or (1.10 × 1.075) − 1 = 0.1825. The question only asks for the impact of the change in the value of the USD.

Which of the following currency translation methods is most appropriate in a hyperinflationary economy under US GAAP? The: A) current rate method since the translation gain or loss is shown on the income statement. B) current/non-current method since current assets and liabilities are translated at the current exchange rate. C) temporal method because all non-monetary accounts are translated at the historical rate.

C is correct The temporal rate method is most appropriate because the value of non-monetary assets and liabilities is translated at the historical rate. Under IFRS, the firm restates the financials using an inflation index, and then translates using the current rate method.

Which of the following statements is least accurate regarding the use of the temporal method for foreign exchange accounting? A) All monetary assets are translated at the current rate of exchange. B) All nonmonetary assets and liabilities are translated at the historical rate of exchange. C) Under the temporal method, the foreign exchange gain or loss is placed on the balance sheet in the equity section.

C is correct Under the temporal method, the foreign exchange gain or loss is placed on the income statement.

what metric is being used within a common-sized balance sheet? A.) total current assets B.) total liabilities C.) fixed assets + current assets + current liabilities D.) Total assets

D is correct common sized financial statements use different metrics sales for income statement total assets for balance sheet

Under U.S. GAAP, the temporal method is preferred to the current rate method in hyperinflationary economies because the temporal method: A) results in non-monetary asset values that are a better proxy for the economic values of those assets. B) is easier to perform under hyperinflation. C) provides better conversions of subsidiary revenues.

A is correct The temporal method results in non-monetary asset values that are a better proxy for the economic values of those assets than those obtained under the current rate method. Both methods convert revenues and SG&A at the average rate so there could be no clear preference when considering these measures.

If segmental cash flow data has not been reported, we can most appropriately approximate cash flow as: A) EBIT + depreciation + amortization. B) operating cash flow − cash interest − cash taxes. C) EBIT + non-cash charges + increase in working capital.

A is correct We are most likely to approximate segment cash flow as EBIT plus depreciation and amortization. This calculation is necessary because segmental cash flow data is generally not reported.

Aggergate accruals ratio (19) = 15% Aggergate accruals ratio (20) = 17% Aggergate accruals ratio (21) = 19% which of the following is true A.) earnings quality is deteriorating over time B.) earnings quality is improving over time C.)

A is correct increasing accruals ratio means company's earnings quality is worsening

Tiny Company, a subsidiary of Large Corporation, operates in a country that is experiencing hyperinflation. Assuming Large follows IFRS, which of the following exposures will result in a net purchasing power LOSS ? A) Monetary assets B) Monetary liabilities. C) Nonmonetary assets and nonmonetary liabilities.

A is correct non monetary items are not exposed to gains or losses resulting from inflation monetary assets = net purchasing power LOSS monetary liabilities = net purchasing power GAIN

This is the currency of country in which the foreign subsidiary is located: A.) Functional currency B.) Local currency C.) Presentational currency "Reporting Currency"

B is correct

a business segment is a portion of a larger company that accounts for more than ___% of the company's revenues earnings or assets A.) 5% B.) 10% C.) 20%

B is correct

Which of the following statements is least accurate regarding accounting for foreign currency translations? The: A) current rate method applies the average exchange rate to all income statement accounts. B) current rate method applies the current exchange rate to all balance sheet accounts. C) temporal method uses the historical exchange rate to translate non-monetary assets and liabilities into the currency of the country of the parent company.

B is correct common stock does not use current rate