1. The factor used to convert from one country’s currency to another country’s currency is called the :a) Interest rateb) Cost of capitalc) Exchange rated) Strike price

2. Purchasing an option to buy foreign currency at a predetermine exchange rate in order to reduce exchange risk is called:a) Transfer pricing b) Hedgingc) Translatingd) Cross-Listing

3. ABCO Corporation has a parts division in country A. Its assembly division is in country B, which has a higher tax rate than country A. To minimize the corporation’s overall income tax, how should ABCO set it’s transfer prices between its parts and assembly divisions?a) The parts division should sell parts to the assembly division at low pricesb) The parts division should sell parts to the assembly division at high pricesc) It doesn’t matter what transfer price is used because the divisions are part of the same companyd) Transfer pricing has nothing to do with the total tax paid by the corporation

4. The accounting standards in code law countries tend to be :a. Very detailedb. Formulated by organizations such as the FASBc. Stated broadly without much guidance on accounting proceduresd. Very conservative

5. C. Similar

6. What term is used to refer to a cultural aversion to ambiguous situations?a) Uncertainty avoidanceb) Masculinityc) Power distanced) Individualism

7. De facto harmonization refers to :a) The process of making accounting practice consistent across countriesb) The process of making accounting regulations consistent internationallyc) Forcing accounting differences to be resolved through litigationd) Creating one set of accounting standards

8. In addition to the International Accounting Standard’s Board (IASB) which of the following organizations was considered to be one of the two most important forces in efforts to harmonize accounting standards ?a) U.S. Financial Accounting Standards Board (FASB)b) United Nations (UN)c) North Atlantic Treaty Organization (NATO)d) European (EU)

9. The second phase (1989-1993) of the IASC’s efforts to harmonize accounting standards was aimed at what goal ?a) Making international accounting standards more flexibleb) Creating greater financial statement comparability across countriesc) Adding new alternatives for accounting practice desired by the international communityd) Strengthening the enforcement power of the IASC

10. According to the Framework for Preparation and Presentation of Financial Statements of the IASB, which of the following is NOT required for asset recognition?a) Control of the resourcesb) Ownership of the resourcesc) Future economic benefitd) Reliable measurement of the cost or value of the resources

PG DARI ALSUT chapter51. Under IAS 37, how are contigent liabilities treated in the financial statements?

a. They are disclosed in the notes to the financial statements when there is more than a remote possibility of an outflows of resources

2. How does U.S GAAP require prior service costs related to retirees to be recognized?a. Amortize over remaining expected life of the retirees

3. Under IAS 19, employee benefits, which of the following benefits are covered?a. All of the above

4. 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.

5. 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 determineda. At the earlier of the date a commitment for performance is reached or the date the services are actually completed

6. Under IAS 36, Income Taxes, which of the following issues are covered?a. All of the above

7. What kinds of temporary differences related to income taxes can arise under IFRS that don’t occur under U.S GAAP?a. Both (A) and (B)

8. Under IAS 18, which of the following is an employee of retention of significant risks and rewards by the seller?a. Receipt of revenue by the seller is contigent on the buyer generating revenue through its sale of the goods.

9. IAS 32 defines a financial instruments asa. any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another

entity

10. 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

CHAPTER 7-81. 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 has pegged its currency to the currency of country Y

2. The number of U.S Dollars ($) today to buy on U.K pound (£) six months from now is called:a. The forward rate

3. What term is used for an option with a positive intrinsic value?a. in the money

4. What information is needed to determine the fair value of a foreign currency forward contract?a. all of the above information is needed

5. What kind of exposure exists for recognized foreign currency assets and liabilitiesa. cash flow exposure

6. Which items in the balance sheet are subject to accounting exposure?a. all accounts translated at current exchange rate

7. Which of the following methods for translating foreign currency financial statements attempts to produce consolidated financial statements as if a subsidiary had actually used the parent company’s currency for all its transactions?a. temporal method

8. Under the temporal method of consolidating foreign currency financial statements, what exchange rate should be used for translating the depreciation expense recorded by asubsidiary?a. historical rate

9. Under FASB ASC 830, Foreign currency matters, what is the definition of “Functional currency”a. the primary currency used by the subsidiary

10. How does FASB ASC 830, Foreign currency matters define a “Highly infliationary economy”?a. Cumulative three year inflation over 100%

CASE 1

CASE 2

ESSAY

1. Compare and contrast the mechanism to regulate financial reporting in the China, German and Indonesia

2. Explain the arguments for and against international convergence of financial reporting standards.