International Accounting

Which of the following inventory valuation methods, commonly used under the U.S. GAAP, is NOT allowed under IAS 2 (Inventories)? A. LIFO B. FIFO C. Weighted average D. Retail inventory method

A. LIFO

Which of the following is NOT a problem caused by accounting diversity? A. Lack of qualified international auditors B. Preparation of consolidated financial statements C. Access to foreign capital markets D. Comparability of financial statements

A. Lack of qualified international auditors

If most of a country's business financing comes from families, banks, and the government, what should we expect in terms of information disclosure to the public? A. Relatively little disclosure because the public isn't a major factor B. A great deal of disclosure because it will be the only way for interested parties to learn about the company C. Complete openness of accounting records D. No disclosure at all

A. Relatively little disclosure because the public isn't a major factor

How does IAS 38 (Intangible Assets) differ from U.S. GAAP with respect to development costs? A. U.S. GAAP does not allow capitalization of development costs, whereas IAS 38 allows capitalization of these costs. B. U.S. GAAP requires capitalization of development costs, whereas IAS 38 makes capitalization of these costs optional. C. U.S. GAAP treats development costs as part of "Goodwill", whereas IAS 38 treats these costs as an intangible asset. D. U.S. GAAP requires expensing of all development costs, and IAS 38 requires capitalizing all development costs.

A. U.S. GAAP does not allow capitalization of development costs, whereas IAS 38 allows capitalization of these costs

Under IAS 17, in a sale-leaseback transaction, how must the initial owner treat any gain on a finance lease? A. Defer it and amortize it into income over the life of the lease. B. Recognize it in income immediately. C. Defer it until the end of the lease term, including extensions. D. He/she can choose to either defer it or recognize it in income immediately.

A. defer it and amortize it into income over the life of the lease

In what way does the IASB standard on leases (IAS 17) differ from U.S. GAAP? A. It is less specific than U.S. GAAP in terms of defining what constitutes a finance lease. B. U.S. GAAP requires more professional judgment in accounting for leases than does IAS 17. C. IAS 17 is more specific than U.S. GAAP in defining an operating lease. D. Operating leases are capitalized under IAS 17 but are not capitalized under U.S. GAAP.

A. it is less specific that U.S. GAAP in terms of defining what constitutes a finance lease

What term is used to describe accounting standards that encourage risk-taking in financial reporting? A. Optimism B. Conservatism C. Professionalism D. Transparency

A. optimism

Relative to accounting standards in countries such as Germany, whose accounting laws are only 47 pages long, accounting practice in the U.S. is often described as being subject to: A. standards overload. B. standards minimization. C. the optimal amount of accounting regulation. D. ideal accounting standards.

A. standards overload

The following information was taken from the fixed asset records of Bosco Ltd. as of December 31, 2010: Carrying value €100,000 Selling price €85,000 Costs of disposal €3,000 Expected future cash flows €75,000 Present value of expected future cash flows €63,000 Using IAS 36, what is the amount of impairment loss? A. €18,000 B. €37,000 C. €15,000 D. €25,000

A. €18,000

Camerata Construction borrowed €19,000,000 for 10 years at 6% specifically to modernize its operations with new equipment. The average rate of interest on Camerata's debt after considering the most recent loan was 5.5%. What rate of interest should be used for capitalizing the borrowing costs on the new equipment under IAS 23? A. 5.5% B. 6% C. 5.75% D. Some other amount

B. 6%

In Gray's framework for accounting system development, optimism is a value of accounting standards that would most likely be found in _____. A. Japan B. Australia C. Mexico D. Brazil

B. Australia

Historical cost is the primary basis for asset valuation under U.S. GAAP. Why is historical cost NOT as important in the accounting systems of Latin America as in the U.S.? A. Historical costs are too difficult to calculate in the currencies used in Central and South America. B. The countries of Latin America have experienced very high rates of inflation, which would make historical costs meaningless to readers of financial statements. C. There is very little foreign direct investment in the countries of Latin America, so few assets need to be accounted for. D. In Latin America, asset prices are very stable, making historical costs equal to replacement costs, so it doesn't matter which valuation basis is used.

B. The countries of Latin America have experienced very high rates of inflation, which would make historical costs meaningless to readers of financial statements

What is one major difference between IFRS and U.S. GAAP relative to discontinued operations? A. U.S. GAAP requires that the after-tax gain or loss from operations and the after-tax gain or loss on asset disposal be shown as a combined item. B. U.S. GAAP requires both pre-tax and after-tax profit and loss on discontinued operations to be reported on the income statement. C. The definition of the type of operation that can be classified as discontinued is narrower under U.S. GAAP. D. IFRS requires no separate disclosure for discontinued operations.

B. U.S. GAAP requires both pre-tax and after-tax profit and loss on discontinued operations to be reported on the income statement

Which of the following is generally true about the differences between U.S. GAAP and IFRS? A. U.S. GAAP is more flexible than IFRS. B. U.S. GAAP tends to be more rules-based and IFRS tend to be principles-based. C. More professional judgment is required to apply U.S. GAAP than is required for implementing IFRS. D. In all cases, U.S. GAAP is more detailed than the IFRS.

B. U.S. GAAP tends to be more rules-based and IFRS tend to be principles-based

How does IAS 34 (Interim Financial Reporting) differ from U.S. GAAP? A. U.S. GAAP has no guidance for interim financial reporting. B. U.S. GAAP treats interim periods are an integral part of the full year. C. U.S. GAAP is the same as IAS 34. D. U.S. GAAP requires that an interim period be projected pro rata for the entire year

B. U.S. GAAP treats interim periods are an integral part of the full year

In Gray's framework for accounting system development, the cultural dimensions of individualism, power distance, uncertainty avoidance, and masculinity directly affect: A. accounting systems. B. accounting values. C. external influences. D. ecological influences.

B. accounting values

In the Nobes classification of accounting systems, micro-based accounting systems are oriented toward: A. government economics. B. business practices. C. tax laws. D. code law.

B. business practices

Under U.S. GAAP, interest on loans secured to acquire fixed assets must be: A. expensed in the period they are incurred. B. capitalized as part of the fixed asset cost. C. either expensed currently or capitalized as part of the fixed asset cost. D. charged against revenue in the year the asset is put into service.

B. capitalized as part of the fixed asset cost

Agro-World Technologies Inc. incurred $1,000,000 to construct a pilot plant to study the feasibility of building agricultural machinery more inexpensively for emerging economies. How would this cost be classified under IAS 38 (Intangible Assets)? A. Research costs B. Development costs C. Neither research nor development D. It could be either research or development, depending on management's wishes.

B. development costs

If a company chooses the revaluation model permitted in IAS 16 for fixed asset measurement: A. annual revaluations must be performed on each class of assets. B. it must update the valuation so that the balance sheet represents fair value on the balance sheet date. C. appraisals must be performed by an official of the IASB. D. the depreciated replacement cost must be used as the fair value of the fixed asset.

B. it must update the valuation so that the balance sheet represents fair value on the balance sheet date

Under a joint exposure draft issued by the IASB and FASB in 2010, what is one of the most significant proposals? A. IFRS and U.S. GAAP would have identical quantifiable criteria for lease classification. B. Leases would no longer be classified as finance or operating. C. Lessors would recognize income immediately at the inception of the lease. D. There would be no lease disclosure required in the notes to the financial statements.

B. leases would no longer be classified as finance or operating

Which of the following is found in a Mexican income statement in the "Comprehensive Financing Result" section? A. Non-controlling interest net income B. Purchasing power gain or loss during inflationary periods C. Income taxes D. Equity in income of associates

B. purchasing power gain or loss during inflationary periods

Which of the following financial statements is NOT universally included in annual reports? A. Balance sheet B. Statement of cash flows C. Income statement D. All of the above statements are included in annual reports worldwide.

B. statement of cash flows

The 1993 study by Doupnik and Salter found that a cluster of Latin American countries indicated that the similarity of their accounting systems was related to: A. a common currency. B. the importance of inflation. C. the colonial influence of Spain. D. the colonial influence of the United States of America.

B. the importance of inflation

According to Gray's framework for accounting system development, the counterpart to the accounting value of "secrecy" is: A. professionalism. B. transparency. C. optimism. D. flexibility.

B. transparency

The following information was taken from the fixed asset records of Bosco Ltd. as of December 31, 2010: Carrying value €100,000 Selling price €85,000 Costs of disposal €3,000 Expected future cash flows €75,000 Present value of expected future cash flows €63,000 Using IAS 36, what is the recoverable amount? A. €85,000 B. €82,000 C. €63,000 D. €75,000

B. €82,000

The following inventory information was taken from the records of Kleinfeld Inc.: Historical cost $12,000 Replacement cost $7,000 Expected selling price $9,000 Expected selling cost $500 Normal profit margin 50% of price Under U.S. GAAP, what should the balance sheet report for Inventory? A. $9,000 B. $8,500 C. $7,000 D. $10,000

C. $7,000

Which financial statement is provided by virtually all corporations worldwide? A. Statement of Cash Flows B. Statement of Changes in Financial Position C. Balance Sheet D. Statement of Changes in Non-current Assets

C. Balance Sheet

In Gray's framework for accounting system development, which of the following countries tends to have a relatively high degree of transparency in their companies' financial statements? A. Germany B. Switzerland C. United Kingdom D. Saudi Arabia

C. United Kingdom

According to Gray's framework which is an extension of Hofstede's model of cultural pattern, which of the following is true about accounting system development? A. Accounting system development is mainly influenced by a country's constitutional framework. B. Countries following limited disclosures adhere less strictly to the notion of conservatism in the measurement of assets and liabilities. C. Accounting system development is influenced by a less conservative approach resulting in the development of short-term oriented accounting practices. D. The external factors have a direct influence on the development of institutional framework leading to the development of accounting systems.

C. accounting system development is influenced by a less conservative approach resulting in the development of short-term oriented accounting practices

Individualism, power distance, uncertainty avoidance, and masculinity are examples of: A. accounting values. B. ecological factors. C. cultural dimensions. D. external forces.

C. cultural dimensions

Under IAS 38, which of the following items is specifically EXCLUDED from being recognized as an internally generated intangible asset? A. Computer software costs B. Copyrights C. Customer lists D. Motion picture films

C. customer lists

According to IAS 16 (Property, Plant and Equipment), what is the term used to indicate the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm's length transaction? A. Replacement cost B. Net realizable value C. Fair value D. Historical cost

C. fair value

In code law countries such as Germany, France, and Japan, tax law and accounting standards tend to be: A. unrelated. B. very different. C. general. D. detail oriented.

C. general

A cultural preference for a loosely knit social fabric rather than a tightly knit social fabric is referred to as: A. uncertainty avoidance. B. masculinity. C. individualism. D. power distance.

C. individualism

Rive Rouge Confections Company incurred €5,000,000 to determine if chocolate could be made to resist melting by adding certain inert minerals to the mixture. According to IAS 38, how should Rive Rouge record this cost? A. It should be capitalized as a deferred development cost. B. It should be treated as a cost of products it currently markets. C. It should be expensed currently D. It should be amortized over 20 years.

C. it should be expensed currently

In an Ernst & Young 2005 survey of 130 companies' Forms 20-F filed with the SEC, what issue required adjustments by the greatest number of companies? A. Goodwill B. Leases C. Pensions D. Wages

C. pensions

Chien Bleu Ltd. purchased a building in 2009 for €10,000,000 and as of December 31, 2015 had recorded accumulated depreciation on the building of €3,000,000. On December 31, 2015, the company conducted its first revaluation when the fair value was €12,000,000. According to IAS 16, what account should be credited for €5,000,000? A. Loss on Revaluation—Building B. Gain From Revaluation of Building C. Revaluation Surplus—Building D. Revaluation Revenue—Building

C. revaluation surplus-building

The accounting standards in code law countries tend to be: A. very detailed. B. formulated by organizations such as the FASB. C. stated generally without much guidance on accounting procedures. D. very conservative.

C. stated generally without much guidance on accounting procedures

What do IASB standards say about related party transactions? A. They are illegal in most countries and must be avoided. B. Related party transactions should be eliminated from the financial statements. C. They must be disclosed in the notes to the financial statements. D. None of the above

C. they must be disclosed in the notes to the financial statements

What types of differences can cause issues between International Financial Reporting Standards and U.S. GAAP? A. Measurement B. Alternatives available C. Disclosure D. All of the above may be different between IFRS and U.S. GAAP.

D. All of the above may be different between IFRS and U.S. GAAP

It is generally believed that the 1997 financial crisis in East Asia was partly due to accounting factors in that part of the world. Which of the following accounting values was lacking in that part of the world and thereby contributed to the crisis? A. Professionalism B. Statutory Control C. Uniformity D. Transparency

D. Transparency

How does the treatment of borrowing costs under U.S. GAAP differ from IFRS? A. U.S. GAAP has no guidance for accounting treatment related to borrowing costs. B. U.S. GAAP specifically includes foreign exchange gains and losses on foreign currency borrowings. C. The definition of borrowing costs under U.S. GAAP is broader in scope than the definition of interest cost under IAS 23. D. U.S. GAAP does not allow netting of interest income against interest cost.

D. U.S. GAAP does not allow netting of interest income against interest cost

Which of the following items should be included in the cost of property, plant, and equipment under IAS 16? A. All costs directly attributable to getting the asset to the proper location B. Import duties and taxes C. Estimated costs of removing the asset D. All of these should be considered part of the cost of the asset.

D. all of these should be considered part of the cost of the asset

According to Gray's framework for accounting system development, which of the following is directly affected by ecological influences, such as geography, demography, and technology? A. Accounting values B. Accounting systems C. Institutional consequences D. Cultural dimensions

D. cultural dimensions

Through 50 years of high quality service, Domo Diagnostics Laboratory has created goodwill with its clients that management estimates is worth at least $20,000,000. Under IAS 38, how should this be recognized? A. An intangible asset "Goodwill" should be debited for $20,000,000. B. The $20,000,000 should be expensed over a period of 20 years. C. The $20,000,000 should be expensed over a period of 50 years. D. It should not be recognized in Domo's accounting records at all.

D. it should not be recognized in Domo's accounting records at all

The extent to which hierarchy and unequal authority distribution in institutions and organizations are accepted within a culture is referred to as: A. uncertainty avoidance. B. masculinity. C. individualism. D. power distance.

D. power distance

Countries such as the U.S. tend to value self-regulation of accounting. What term is used to define this subculture? A. Uniformity B. Flexibility C. Conservatism D. Professionalism

D. professionalism

Which of the following statements is true about the comparability of financial statement of the United States and the United Kingdom? A. The result of Latin American colonialism is the large number of countries with the United Kingdom's influence on their accounting practices. B. The financial statements of companies in the United States and the United Kingdom are comparable as they are prepared after adjusting inflation, which is a critical factor affecting accounting practice. C. The basic principle followed by both countries in preparing financial statements is government economics and government tax and legal framework. D. The accounting practices of both the countries are oriented toward the decision needs of a large number of investors and creditors.

D. the accounting practices of both the countries are oriented toward the decision needs of a large number of investors and creditors

In the United States, conformity between presentation of the financial statements and the tax statements is required only for: A. goodwill. B. depreciation. C. gains or losses on securities. D. the use of the LIFO inventory cost flow assumption.

D. the use of the LIFO inventory cost flow assumption