ACCT 5535 (Global): Final Exam
How should stock options be accounted for under IASB standard on stock options (IFRS 2)? A. Since their value is not determinable until a future date, they are not recorded, but only disclosed in the notes to the financial statements. B. A compensation expense is recorded based on the value of the options expected to vest as of the date the options are granted. C. An expense is recorded only if a market value for the options exists on the date the options are granted. D. The options are recorded as a liability for the value of the stock at the exercise date.
B. A compensation expense is recorded based on the value of the options expected to vest as of the date the options are granted.
Under IAS 1, Presentation of Financial Statements, how must deferred taxes be classified on the balance sheet? A. As either a current asset or a current liability B. As always a noncurrent asset or a noncurrent liability C. As either a current or noncurrent asset or liability based on the expected timing of realization D. As a separately stated positive or negative component of equity
B. As always a noncurrent asset or a noncurrent liability
The term "provision" as it is used in IAS 37, is most closely related to what term in U.S. GAAP? A. Contingent liability, where the outflow of resources is "remote." B. Contingent liability, where the outflow of resources is "probable." C. Current liability, where the outflow is difficult to measure. D. Reserve for bad debt, where the amount recoverable is "uncertain."
B. Contingent liability, where the outflow of resources is "probable."
The central bank of Country X buys and sells its own currency to ensure that the currency is always exchanged in a ratio of 2:1 with the currency of Country Y. What can we conclude about these two currencies? A. Country X is using the Euro. B. Country X has pegged its currency to the currency of Country Y. C. Country X has an undesirable currency. D. Country X allows its currency to float relative to the currency of Country Y.
B. Country X has pegged its currency to the currency of Country Y.
Under a joint Exposure Draft issued by the IASB and FASB in June 2010, Revenue from Contracts with Customers, which of the following is NOT one of the steps to be applied in the recognition of revenue across a wide range of transactions and industries? A. Identify the contract with a customer. B. Do not separate the transaction price for separate performance obligations if the contract is a bundled contract where goods and services are not sold separately. C. Identify the separate performance obligations in the contract. D. Determine the transaction price.
B. Do not separate the transaction price for separate performance obligations if the contract is a bundled contract where goods and services are not sold separately.
Under IFRS 2, Share-based Payment, what approach is used to account for the transaction? A. Comparable transaction approach B. Fair value approach C. Market approach D. Notional value approach
B. Fair value approach
Homeko, Inc. is located in the U.S., but it has subsidiaries in Germany. When the euro appreciates relative to the U.S. dollar, what is the direction of the translation adjustment to consolidate Homeko's financial statements? A) When there is net asset exposure, the translation adjustment will be positive. B) When there is net liability exposure, the translation adjustment will be positive. C) The direction of the adjustment is indeterminate. D) There will be no adjustment necessary unless the difference is realized.
A
How is the international standard for translating foreign currency financial statements (IAS 21) different from U.S. GAAP with respect to subsidiaries in hyperinflationary economies? A) IAS 21 requires that the subsidiary's financial statements be restated to account for the inflation before using the current exchange rate for all balance sheet accounts. B) IAS 21 requires that the temporal method be used for translating the foreign currency financial statement. C) IAS 21 requires the current rate method without taking into consideration any inflation adjustment. D) U.S. GAAP requires that foreign subsidiary financial statements be restated to account for inflation before applying the current rate method.
A
Placo Ltd., a Scottish subsidiary of Limko, Inc., a U.S. company, showed cost of goods sold on its income statement for the year ended December 31, 2010. Inventory, 1/1/10 £100,000 Purchases 900,000 Cost of Goods Available for sale 1,000,000 Inventory, 12/31/10 200,000 Cost of Goods Sold £800,000 Exchange rates/£ December 31, 2010 $0.522 December 31, 2009 $0.560 2010 average $0.547 What amount should be used to consolidate Placo's cost of goods sold into Limko's income statement under the temporal method? A) $443,900 B) $437,600 C) $432,500 D) $448,000
A
Under FASB ASC 830, Foreign Currency Matters, when the temporal method is used, how are translation adjustments treated in the consolidated financial statements? A) As gains or losses on the current period consolidated income statement B) As prior period adjustments to retained earnings of the parent C) As part of other comprehensive income on the consolidated balance sheet D) None of the above because the temporal method is not allowed under FASB ASC 830.
A
What is the paradox of hedging balance sheet exposure? A) Real costs can be incurred to hedge an unrealized translation adjustment. B) The hedging process rarely works the way management intended. C) Hedging is a conceptual process that is nearly impossible to undertake in the real world. D) Markets have yet to be developed that offer the kinds of derivative instruments required for hedging.
A
When the parent company of a foreign subsidiary believes that all of its investment in the subsidiary is exposed to foreign exchange risk, what method of translation should be used in consolidating the financial statements? A) Current rate method B) Current/noncurrent method C) Monetary/nonmonetary method D) Temporal method
A
What is the journal entry required to recognize a deferred tax asset of $50,000? A. Dr. Deferred Tax Asset $50,000, Cr. Income Tax Benefit $50,000 B. Dr. Deferred Tax Asset $50,000, Cr. Equity $50,000 C. Dr. Income Tax Expense $50,000, Cr. Deferred Tax Asset $50,000 D. Dr. Deferred Tax Asset $50,000, Cr. Deferred Tax Liability $50,000
A. Dr. Deferred Tax Asset $50,000, Cr. Income Tax Benefit $50,000
Under U.S. GAAP, if an entity issues 4% preferred stock that gives shareholders the right to redeem the shares if the prevailing interest rates on 5-year certificates of deposit exceed 4%, how should this stock be accounted for on the books of the entity? A. Initially as equity and then reclassified as a liability when the triggering event occurs B. As a liability since the chances are more likely than not that the triggering event will occur C. As equity or a liability at the option of the entity D. As a permanent part of equity, to be debited as shares are redeemed
A. Initially as equity and then reclassified as a liability when the triggering event occurs
Under IAS 39, Financial Instruments: Recognition and Measurement, which of the following is NOT a category into which a financial asset must be classified? A. Property, plant, and equipment B. Held-to-maturity investments C. Loans and receivables D. Available-for-sale financial assets
A. Property, plant, and equipment
What is a "foreign exchange rate?" A. The price to buy a foreign currency B. The price to buy foreign goods C. The difference between the price of goods in a foreign currency and the price in a domestic currency D. The cost to hold all monetary assets in a single currency
A. The price to buy a foreign currency
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.
A. They should be disclosed in the notes to the financial statements if the inflow of resources is probable.
Under U.S. GAAP, with respect to equity-settled share-based payments, if the fair value of the equity instrument is used, the value is determined: A. at the earlier of the date a commitment for performance is reached or the date the services are actually completed. B. at the date the services are actually completed. C. at the date a commitment for performance is reached. D. None of the above
A. at the earlier of the date a commitment for performance is reached or the date the services are actually completed.
The primary difference between IAS 37, and U.S. GAAP concerning the treatment of contingent liabilities pertains to: A. definition of terms. B. measurement. C. classification on the balance sheet. D. disclosure of relevant information.
A. definition of terms.
Under U.S. GAAP, when new debt is issued for old debt: A. extinguishment costs are deferred and amortized over the term of the new debt. B. debt extinguishment costs are expensed as incurred. C. modification costs are amortized over the term of the old debt. D. old debt is not extinguished and new debt is recognized.
A. extinguishment costs are deferred and amortized over the term of the new debt.
Under IAS 12, current and deferred taxes are measured on the basis of: A. rates that have been enacted or substantively enacted by the balance sheet date. B. current rates and rates anticipated when temporary differences reverse. C. rates anticipated when temporary differences reverse. D. rates prevailing when the entity provided goods or services.
A. rates that have been enacted or substantively enacted by the balance sheet date.
The number of Japanese yen (¥) required today to buy one U.S. dollar ($) today is called: A. the spot rate. B. the exact rate. C. the forward rate. D. the retail rate.
A. the spot rate.
Which of the following is a difference between IAS 37 and U.S. GAAP with respect to restructuring provisions? A.U.S. GAAP does not allow recognition of a restructuring provision until a liability has been incurred. B.There is no difference between IAS 37 and U.S. GAAP with respect to restructuring provisions. C.IAS 37 does not allow recognition of a restructuring provision until a liability has been incurred. D.A restructuring provision and related loss is more likely to occur later under IAS 37 than under U.S. GAAP.
A.U.S. GAAP does not allow recognition of a restructuring provision until a liability has been incurred.
A Danish subsidiary of a U.S. corporation recorded a building it purchased in 2020 for 100,000,000 krone, when the exchange rate was $0.132/krone. The current exchange rate is $0.163/krone. Under the temporal method, how should the translated amount of the restated asset be interpreted? A) The U.S. parent would have to pay $16,300,000 to acquire the building today. B) The U.S. parent would have had to pay $13,200,000 to acquire the building in 2020. C) The building is worth $13,200,000 to the U.S. parent today. D) None of the above
B
Essco Ltd, a foreign subsidiary of Peako Corp., has written down its inventory to current market value under a "lower of cost or market" rule. When consolidating Essco's balance sheet into Peako's balance sheet using the current rate method, what exchange rate should be used for the inventory under the temporal method? A) Historical rate B) Current rate C) Average rate D) Cannot be determined with the information given
B
International accounting standards define functional currency as: A) the currency of the parent company. B) the currency of the primary economic environment in which the subsidiary operates. C) the currency of the primary economic environment in which the parent operates. D) the currency used by a subsidiary for its financial reporting.
B
Placo Ltd., a Scottish subsidiary of Limko, Inc., a U.S. company, showed cost of goods sold on its income statement for the year ended December 31, 2010. Inventory, 1/1/10 £100,000 Purchases 900,000 Cost of Goods Available for sale 1,000,000 Inventory, 12/31/10 200,000 Cost of Goods Sold £800,000 Exchange rates/£ December 31, 2010 $0.522 December 31, 2009 $0.560 2010 average $0.547 What amount should be used to consolidate Placo's cost of goods sold into Limko's income statement under the current rate method? A) $417,600 B) $437,600 C) $448,000 D) $443,900
B
Under both the temporal method and the current rate method, what exchange rate should be used to translate a foreign subsidiary's dividends into parent company currency? A) Current rate B) Historical rate C) Average rate D) Any of the above methods can be used under both the temporal and current method.
B
Under the current rate method of translating foreign currency financial statements, what exchange rate should be used for cost of goods sold? A) Spot rate at the end of the year B) Average rate during the year C) Spot rate mid-year D) There is no single rate because beginning and ending inventory must be converted at different exchange rates than purchases.
B
What exchange rate should be used to translate the common stock of Essco Ltd, a foreign subsidiary of Peako Corp., when consolidating the financial statements using the current rate method? A) Current rate B) Historical rate C) Average rate D) Cannot be determined with the information given
B
What is meant by the "translation" of foreign currency financial statements? A) Converting financial statements prepared under foreign GAAP into domestic GAAP B) Converting financial statements of a foreign currency into a domestic currency C) Converting the language used in financial statements from foreign to domestic D) Converting historic cost financial statements into current cost financial statements
B
What is the "disappearing plant" problem that is addressed by FASB ASC 830, Foreign Currency Matters? A) This refers to the accelerated depreciation methods that are popular for fixed asset valuation. B) High inflation can result in extreme decreases in the reported amounts for foreign fixed assets. C) Cheap foreign currency results in U.S. companies moving factory operations offshore. D) Investment in fixed assets was not being reported on foreign subsidiary financial statements.
B
What is the primary difference between transaction exposure and accounting exposure? A) Transaction exposure results from changes in currency exchange rates, whereas accounting exposure is the result of changes in accounting method. B) Transaction exposure results in changes in cash flow, whereas accounting exposure does not necessarily result in changes in cash flow. C) Transaction exposure must be hedged, but accounting exposure does not need to be hedged. D) Transaction exposure affects only monetary assets and liabilities, whereas accounting exposure affects all assets and liabilities.
B
SilverStone Inc. supplies emission systems worth $100,000 to Horizon Enterprises. As per the terms of sale contract, SilverStone takes back all unused emission systems. Horizon estimates that 5% of the emission systems will be returned. Under IAS 18, only four out of the five conditions for recognizing revenue from the sale of goods are met as economic benefits of 95% of sale will flow to SilverStone. How much revenue should be recognized by SilverStone Inc.? A. The recognition of the entire sale must be deferred until the fifth condition has been met. B. $75,000 of the sales price can be currently recognized as revenue and $25,000 will be treated as a deferred revenue (liability). C. The entire $100,000 sales price can be currently recognized since most of the conditions have been met. D. None of the above represents a proper treatment of this sale.
B. $75,000 of the sales price can be currently recognized as revenue and $25,000 will be treated as a deferred revenue (liability).
King's Bank, a British company, purchases market research services from Harris Interactive, a U.S. company. As per the terms of the contract, payment is to be made three months later in U.S. dollars when the report is delivered. How would King's Bank like to see the exchange rate move, assuming it isn't hedging the transaction? A. It hopes that the U.S. dollar appreciates in value against the British pound. B. It hopes that the British pound appreciates in value against the U.S. dollar. C. It makes no difference, since they are the customer and the sale takes place in the U.K. D. It hopes that there is no change between the spot rate and the forward rate.
B. It hopes that the British pound appreciates in value against the U.S. dollar.
Under IAS 18, which of the following is NOT a condition that must be met in order for revenue from the sale of goods to be recognized? A. The significant risks and rewards of ownership of the goods have been transferred to the buyer. B. There must be a binding, written contract between the seller and the buyer. C. The amount of revenue can be measured reliably. D. Neither continued managerial involvement normally associated with ownership nor effective control of the goods is retained.
B. There must be a binding, written contract between the seller and the buyer.
Under IFRS 2, with respect to cash-settled share-based payments, when an employee has received stock appreciation rights, how is the fair value of those rights measured? A. Using the consolidation method B. Using an option pricing model C. Using the dividend discount approach D. All of the above
B. Using an option pricing model
Under the IASB's exposure draft, Income Tax, how would the term "substantively enacted", as it applies to tax laws, be determined? A. When the affected jurisdiction has issued final regulations with respect to a tax law B. When any future steps in the enactment process can't change the outcome C. When one part of a bicameral legislature has passed a tax bill D. All of the above
B. When any future steps in the enactment process can't change the outcome
What is one problem in translating retained earnings using either the temporal or current rate method? A) There is no problem, since both methods use the historic rate method for stockholders' equity accounts. B) Dividends are based on an average cost method. C) Net income is calculated differently, depending upon which method is used. D) Dividends are based on the current exchange rate under the current rate method, while they are based on historical rates under the temporal method.
C
When would the balance sheet exposure arising from the current rate method become realized? A) It is realized once the financial statements of the foreign operation and the parent are consolidated. B) It is realized any time the historical exchange rate is different from the spot rate at the balance sheet date. C) It is realized when the foreign operation is sold at book value and the proceeds are converted into parent company currency. D) It can never be realized because it is only the result of the choice of accounting methods and does not reflect real exposure.
C
Which of the following is a limitation of using the temporal method for translating foreign currency financial statements? A) The translated asset and liability amounts have no meaningful interpretation. B) The translation adjustment will usually have a negative impact on income. C) Financial ratios after translation will be distorted. D) All of the above are limitations of the temporal method.
C
Which of the following is true of monetary assets? A) Monetary assets are translated at historical exchange rates under all translation methods. B) Monetary assets are those assets whose values do not fluctuate over time. C) Monetary assets include current assets like marketable securities. D) Monetary assets are always translated at current exchange rates.
C
Which of the following methods for translating foreign currency financial statements is required to be used under IAS 21? A) Current/Non-current method B) Monetary/Non-monetary method C) Temporal method D) All of the above may be used under IAS 21.
C
Which of the following methods for translating foreign currency financial statements is required under IAS 21? A) Current rate method. B) Temporal method. C) Current rate method or temporal method, depending on the functional currency of the subsidiary. D) Current rate method or temporal method must be chosen by management of the parent.
C
Zenith Company, a calendar-year entity, amends its defined benefit pension plan on January 1, 2013 and must recognize the increase in past service costs of its vested and non-vested employees as of that date in the calculation of its net 2013 pension expense (or revenue). The pertinent facts as of January 1, 2013 are: Calculate the past service costs included in 2013 net pension expense (or revenue) under U.S GAAP. A. $5,100 B. $5,400 C. $600 D. $7,000
C. $600
What kinds of temporary differences related to income taxes can arise under IFRS that don't occur under U.S. GAAP? A. Book and tax differences related to the amortization of property, plant, and equipment for book purposes and cost method for tax purposes. B. Book and tax differences related to the calculation of impairments for book purposes with adjustment for tax purposes. C. Book and tax differences related to the revaluation of property, plant, and equipment for book purposes and cost method for tax purposes. D. Book and tax differences related to the calculation of contingent liability for book purposes with no like adjustment for tax purposes.
C. Book and tax differences related to the revaluation of property, plant, and equipment for book purposes and cost method for tax purposes
Under IAS 18, when it is probable that the economic benefits of interest, royalties, and dividends will flow to the enterprise and can be measured reliably, how should revenue be recognized? A. Interest income shall be recognized based on an effective yield basis. B. Royalties are recognized on an accrual basis with reference to the terms of the agreement. C. Dividends are recognized when the shareholders' right to receive payment is established. D. All of the above govern revenue recognition under these circumstances.
D. All of the above govern revenue recognition under these circumstances.
How does U.S. GAAP require the prior service cost related to retirees to be recognized? A. Amortize over the average remaining working lives of active employees B. Recognize immediately C. Don't recognize at all D. Amortize over remaining expected life of the retirees
D. Amortize over remaining expected life of the retirees
Under both IFRS and U.S. GAAP, in an equity-settled share-based payment transaction, how are such payments to non-employees measured? A. At the cost of the goods or services received. B. Both standards are silent as to the treatment of payments to non-employees. C. Always the fair value of the equity instrument. D. At the fair value of goods or services received, if a reliable determination is available otherwise, the fair value of the equity instrument.
D. At the fair value of goods or services received, if a reliable determination is available otherwise, the fair value of the equity instrument.
Under IAS 32, which of the following is a financial asset? A. Investment in equity instruments accounted for under the equity method B. Investment in special-purpose entities C. A 30% investment in a subsidiary D. Loans to other entities
D. Loans to other entities
Which of the following statements is true about the Euro? A. It is the currency used by all countries in the European Union. B. It is pegged to the U.S. dollar. C. It is the currency required to be used in financial reporting under international accounting standards. D. None of the statements above is true.
D. None of the statements above is true.
A bank exchanging foreign currency makes its profit in what manner? A. On the difference between the spot rate and the foreign rate B. A bank is forbidden, by law, to charge a premium in foreign currency exchange C. On the present value of the forward rate discounted to the date an option is purchased D. On the difference between the buying and selling rates
D. On the difference between the buying and selling rates
Under IFRS 2, with respect to choice-of-settlement share-based payments, if the supplier chooses the cash settlement, the entity is deemed to have issued a compound financial instrument consisting of debt and equity. When cash is received, how does the supplier applies it? A. Only against the equity portion B. Apportioned between debt and equity based on relative fair market value of each component C. Only against current year liabilities D. Only against the debt portion
D. Only against the debt portion
Under IAS 12, Income Taxes, how is the relationship between a hypothetical tax expense based on statutory rates and reported tax expense based on the effective tax rate explained? A. A numerical reconciliation between tax expense based on the statutory rate in the home country and tax expense based on the effective tax rate must be presented. B. A numerical reconciliation between tax expense based on the weighted-average statutory rate across jurisdictions in which the company pays income taxes and tax expense based on the effective tax rate must be presented. C. Both (A) and (B) can be acceptable explanations. D. Neither (A) nor (B) are acceptable explanations.
C. Both (A) and (B) can be acceptable explanations.
Why was there very little fluctuation in the foreign exchange rate in the period 1945-1973? A. This was a period when the world economy was very stable. B. There was very little growth in the world economy between 1945 and 1973. C. Countries linked their currency to the U.S. dollar, which was backed by gold reserves. D. Most currencies were pegged to the British pound, which could be converted to sterling silver.
C. Countries linked their currency to the U.S. dollar, which was backed by gold reserves.
Under IAS 39, Financial Instruments: Recognition and Measurement, which of the following terms describes the removal of a financial asset or liability from the balance sheet when certain appropriate criteria have been met? A. Decoupling B. Extinguishment C. Derecognition D. Reversal
C. Derecognition
What is true about both IFRS and U.S. GAAP with respect to service contracts? A. IFRS and U.S. GAAP both allow the use of the percentage-of-completion method. B. Neither IFRS, nor U.S. GAAP allows the use of the percentage-of-completion method. C. IFRS allows the use of the percentage-of-completion method while U.S. GAAP does not. D. U.S. GAAP allows the use of the percentage-of-completion method while IFRS does not.
C. IFRS allows the use of the percentage-of-completion method while U.S. GAAP does not.
Under IAS 32, how should an equity instrument be classified? A. It must always be classified as equity by its very nature. B. The entity has the option of classifying it as a liability or equity. C. If it contains a contractual obligation that meets the definition of a financial liability, it should be classified as a liability. D. The entity should apportion the classification between liability and equity if there is a contractual obligation that meets the definition of a financial liability.
C. If it contains a contractual obligation that meets the definition of a financial liability, it should be classified as a liability.
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.
C. If the entity has a present obligation to settle in cash
Under IAS 1, Presentation of Financial Statements, which of the following is NOT a criterion in the definition of a current liability? A. It is a liability that is expected to be settled in an entity's normal operating cycle. B. It is a liability primarily held for the purpose of trading. C. It is a liability that does not have the right to defer until 18 months after the balance sheet date. D. It is a liability that is expected to be settled within 12 months of the balance sheet date.
C. It is a liability that does not have the right to defer until 18 months after the balance sheet date.
Which of the following statements is true of IAS 19? A.It establishes guidance for measuring onerous contract. B.It requires all past service costs to be recognized in net income in a subsequent period in which the benefit plan is changed. C.Its revised version became effective in the year 2013. D.It covers all employee benefits including share-based compensation.
C.Its revised version became effective in the year 2013.
According to IAS 37, with respect to onerous contracts, a provision should be recognized for "unavoidable costs of the contract", which is: A.the intrinsic value of the contract. B.the lower of cost or market value of the contract. C.the lower of cost of fulfillment or the penalty from non-fulfillment of the contract. D.None of the above
C.the lower of cost of fulfillment or the penalty from non-fulfillment of the contract.
Under FASB ASC 830, Foreign Currency Matters, what is the definition of "functional currency?" A) The primary currency used by the parent company B) The currency that minimizes the translation adjustment on the consolidated financial statements C) The currency in which the subsidiary does its financial reporting D) The primary currency of the foreign entity's operating environment
D
Under both the temporal method and the current rate method, what exchange rate should be used to translate a foreign subsidiary's additional paid-in capital into parent company currency? A) Closing rate B) Current rate C) Average rate D) Historical rate
D
What is the cause of balance sheet exposure? A) Converting subsidiary account balances to balances denominated in the parent company's currency at historical exchange rates B) Completing international transactions in currency other than the currency of the home company C) Translating subsidiary account balances to amounts denominated in the parent company's currency D) None of the above
D
Which method of translating foreign currency financial statements must be used according to FASB ASC 830, Foreign Currency Matters? A) Temporal method for all subsidiaries B) Current rate method for all subsidiaries C) U.S. parent companies may choose between the temporal method and the current rate method D) Temporal method for subsidiaries that are closely controlled by the parent and current rate method for subsidiaries which are not
D
Which of the following items in the balance sheet is subject to accounting exposure? A) Only assets B) Only liabilities and owners' equity C) All accounts translated at historical exchange rates D) All accounts translated at current exchange rates
D
Which of the following methods for translating foreign currency financial statements attempts to produce consolidated financial statements as if a foreign subsidiary had actually used the parent company's currency for all its transactions? A) Current/Non-current method B) Monetary/Non-monetary method C) Current rate method D) Temporal method
D
Zenith Company, a calendar-year entity, amends its defined benefit pension plan on January 1, 2013 and must recognize the increase in past service costs of its vested and non-vested employees as of that date in the calculation of its net 2013 pension expense (or revenue). The pertinent facts as of January 1, 2013 are: Calculate the past service costs included in 2013 net pension expense (or revenue) under IAS 19. A. $5,100 B. $5,400 C. $600 D. $7,000
D. $7,000
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
D. All of the above
Under IAS 12, Income Taxes, which of the following issues are covered? A. Temporary differences B. Operating loss carry forwards C. Tax credit carry forwards D. All of the above
D. All of the above
Under IAS 19, Employee Benefits, which of the following benefits are covered? A. Compensated absences and bonuses B. Post-employment benefits C. Deferred compensation and disability benefits D. All of the above
D. All of the above
Under IAS 32, which of the following is a financial liability? A. A payable B. A bank loan C. An intercompany loan payable D. All of the above
D. All of the above
Under IAS 39, under what circumstances will derecognition of a financial liability occur? A. When the obligation has been paid B. When the obligation has been canceled C. When the obligation has expired D. All of the above
D. All of the above
Which of the following represents a difference in the classification of current liabilities between IFRS and U.S. GAAP? A. Refinanced short-term debt B. Amounts payable on demand due to violation of debt covenants C. Bank overdrafts D. All of the above
D. All of the above
Which of the following is NOT a share-based payment transaction under IFRS 2?transaction under IFRS 2? A. Equity-settled share-based payment B. Cash-settled share-based payment C. Choice-of-settlement share-based payment D. All of the above are share-based payment transactions under IFRS 2.
D. All of the above are share-based payment transactions under IFRS 2.
Under IAS 18, which of the following is an example of retention of significant risks and rewards by the seller? A. The buyer has no right to rescind the purchase. B. The seller is under no obligation for satisfactory performance not covered by normal warranties. C. Goods are sold subject to installation, but installation is not a significant part of the contract and has not yet been completed. D. Receipt of revenue by the seller is contingent on the buyer generating revenue through its sale of the goods.
D. Receipt of revenue by the seller is contingent on the buyer generating revenue through its sale of the goods.
How does U.S. GAAP differ from IFRS with respect to cash-settled share-based payments? A. U.S. GAAP always treats such payments as a liability. B. U.S. GAAP offers the option to treat such payments as either a liability or equity. C. IFRS and U.S. GAAP follow the same approach with respect to such payments. D. U.S. GAAP, under certain circumstances, may treat such payments as equity.
D. U.S. GAAP, under certain circumstances, may treat such payments as equity.
With respect to post-employment medical benefits, U.S. GAAP: A. does not recognize the concept of post-employment medical benefits. B. has considerably less guidance than IAS 19. C. follows the guidance of IAS 19. D. has considerably more guidance than IAS 19.
D. has considerably more guidance than IAS 19.
If a derivative is not designated as a hedge: A. the change in market value must be recognized in net income when it changes. B. the change in market value is not recognized in net income. C. the change in fair value is not recognized in net income. D. the change in fair value must be recognized in net income when it changes.
D. the change in fair value must be recognized in net income when it changes.
What is a "contingent asset?" A.There is no such thing, in IASB standards, as a "contingent asset." B.This is an asset that has been put up as collateral against a loan. C.This is a possible inflow of resources arising from a future activity. D.It is a probable asset, arising from past events, whose existence is yet to be confirmed definitively by a future event.
D.It is a probable asset, arising from past events, whose existence is yet to be confirmed definitively by a future event.
Sigma Company issued $12 million in 10 percent bonds 6 years ago currently having a carrying amount of $10.7 million. The bond agreement allows for early extinguishment by Sigma Company beginning in the current year. Sigma's investment bank has arranged for the company to issue $10 million of new 8 percent bonds at face value to a group of investors. The proceeds will be used to extinguish the 10 percent bonds. The banking, legal, and accounting costs to execute the transaction total $200,000. The journal entry to record the debt extinguishment will include: A. a debit to Bonds Payable 8% for $10,000,000. B. a credit to Gain on Extinguishment of 10% Bonds for $500,000. C. a credit to Bonds Payable 10% for $12,000,000. D. a debit to Loss on Extinguishment of 10% Bonds for of $200,000.
B. a credit to Gain on Extinguishment of 10% Bonds for $500,000.
For an upcoming trip, Pat wants to buy Euros at the local bank when the current exchange rate quoted on OANDA.com was $1.563 per 1. What should Pat plan to pay for 1,000? A. exactly $1,563 B. more than $1,563 C. about $640 D. less than $640
B. more than $1,563
Under IAS 37, inflows of resources that are "virtually certain" to be received should be: A. disclosed as contingent assets in the notes to the financial statements. B. recognized as assets. C. undisclosed until management is absolutely certain that resources will be received. D. reported only in the cash flow statement.
B. recognized as assets.
According to FASB ASC 830, Foreign Currency Matters, which of the following conditions would indicate that a foreign subsidiary's functional currency is the parent company's currency? A) Active local sales market B) Sales price not affected by changes in exchange rate in the short-run C) High volume of intercompany transactions D) All of the above are indicators that the functional currency is the parent company's currency.
C
Companies must choose between which exchange rates for consolidating foreign subsidiaries? A) Spot rate and forward rate B) Spot rate and closing rate C) Current rate and historical rate D) Domestic rate and international rate
C
Excellent Inc. is located in the U.S., but it has subsidiaries in Japan. When the yen depreciates relative to the U.S. dollar, what is the direction of the translation adjustment to consolidate Excellent's financial statements? A) When there is net asset exposure, the translation adjustment will be positive. B) There will be no adjustment necessary unless the difference is realized. C) When there is net liability exposure, the translation adjustment will be positive. D) The direction of the adjustment is indeterminate.
C
In their research published in 1988 related to translating foreign currency financial statements, Doupnik and Evans found that U.S. multinationals were biased in favor of using a foreign currency as the functional currency. What reason did the researchers give for this management decision? A) It was easier than proving to the FASB that a subsidiary's functional currency was the U.S. dollar. B) Doing so allowed companies greater latitude in selecting the method of translating foreign currency financial statements. C) This allows the use of the current method, which defers recognizing translation gains or losses in income. D) This allows the use of the temporal method, which defers recognizing transaction adjustments in income.
C
Under U.S. GAAP, what method of translating foreign currency financial statements must be used for subsidiaries in highly inflationary economies? A) Current rate method B) Current/non-current method C) Temporal method D) Monetary/non-monetary method
C
Under the current rate method of translating foreign currency financial statements, what is the amount of the balance sheet exposure? A) It is equal to the amount of assets recorded by the subsidiary. B) It is equal to the amount of liabilities recorded by the subsidiary. C) It is equal to the foreign operation's net asset position. D) It is equal to total assets plus total liabilities.
C
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
C
Using the temporal method of translating foreign currency financial statements, what basis should be employed when using the "lower of cost or market" rule for inventory valuation? A) Lower of parent currency cost or parent currency market at current exchange rate B) Lower of subsidiary currency cost or subsidiary currency market at appropriate exchange rate C) Lower of parent currency cost or parent currency market at appropriate exchange rate D) Lower of subsidiary currency cost or parent currency market at current exchange rate
C
What is another term for "balance sheet exposure?" A) Transaction exposure B) Exchange exposure C) Translation exposure D) Negative exposure
C
Alpha Inc. has receivables from unrelated parties with a face value of $5,000. It transfers these receivables to bank for $4,500, without recourse. It will continue to collect the receivables, depositing them in a non-interest-bearing bank account with the cash flows remitted to the bank at the end of each month. It is not allowed to sell or pledge the receivables to anyone else and is under no obligation to repurchase the receivables from bank. Which of the following is the appropriate treatment for these Accounts receivables? A. It should show these receivables in its Balance Sheet. B. It should amortize these receivables. C. It should derecognize these receivables. D. It should derecognize these receivables if it retains the interest earned on these.
C. It should derecognize these receivables.
Why is it difficult to compare IAS 18, Revenue, to U.S. GAAP? A. The IASB definition of revenue is very complicated, whereas the definition of revenue under U.S. GAAP is straightforward. B. Revenue is not defined under U.S. GAAP. C. There is no single standard in U.S. GAAP that deals solely with revenue. D. Under U.S. GAAP, revenue is defined in terms of cash, whereas IAS 18 defines revenue in terms of a variety of resources.
C. There is no single standard in U.S. GAAP that deals solely with revenue
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.
C. They are disclosed in the notes to the financial statements when there is more than a remote possibility of an outflow of resources.
Which of the following statements is true of the treatment of actuarial gains and losses under IFRS and U.S. GAAP? A. IFRS requires the disclosure of actuarial gains and losses in the notes to financial statements. B. IFRS requires immediate recognition of actuarial gains and losses in net income. C. U.S. GAAP allows a choice between immediate recognition in other comprehensive income or in net income. D. U.S. GAAP requires the actuarial gains and losses to be recognized immediately through other comprehensive income.
C. U.S. GAAP allows a choice between immediate recognition in other comprehensive income or in net income.
IAS 32 defines a financial instrument as: A. the currency of a foreign country in which the enterprise does business. B. a certified check. C. any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. D. a recognized stock exchange.
C. any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
When a currency is allowed to increase or decrease freely according to market forces, the currency is said to: A. be pegged to another currency. B. be less valuable. C. have independent float. D. devalue.
C. have independent float.
Under U.S. GAAP, a deferred tax asset must be realized when: A. realization is probable. B. realization is possible. C. realization is more likely than not. D. realization is greater than 75% likely.
C. realization is more likely than not.
