Deck 15: International Accounting for Global Operations

Question 1

_________________ aims at gaining benefits through manipulation of prices of intra-MNE transactions on exchange controls and increased profits from joint ventures.

A) Transfer pricing
B) Tax treaties
C) Discrimination pricing
D) Tax strategies

Answer 1

A

Question 2

All are benefits of transfer pricing except

A) tax and tariff reduction.
B) avoiding exchange controls.
C) increasing profits from joint ventures.
D) exemption from tax penalties.

Answer 2

D

Question 3

The most important benefit of transfer pricing to a corporation is

A) more revenue.
B) lower cost of materials.
C) tax avoidance.
D) less competition.

Answer 3

C

Question 4

There are ____ different accounting zones.

A) 4
B) 8
C) 5
D) 11

Question 5

_________________harmonizes national differences in accounting systems.

A) Globalization
B) Internalization
C) Nationalism
D) Regionalization

Question 6

List fundamental issues that should be understood by international business managers.

A) country differences in accounting and international harmonization
B) foreign currency translation
C) cross-border transfer pricing
D) tax havens, treaties, and strategies

Question 7

____________ involves accounting and taxation issues for companies that have internationalized their economic activities across countries in which accounting standards and practices vary.

A) Economic system
B) International accounting
C) Taxation system
D) National environment

Question 8

When the forward exchange rate is below the current spot rate it is referred to as the

A) current rate.
B) discount.
C) MNE.
D) foreign rate.

Question 9

The currency in which assets, liabilities, revenue, and expense are measured.

A) current rate
B) local currency
C) unit of measure
D) accounting

Question 10

__________________ items are translated at the rates that preserve their original measurement bases.

A) Non-monetary
B) Monetary
C) Temporal
D) Current

Question 11

___________________ is the process of restating accounting data recorded in one currency into another currency for the purpose of aggregating data from different reporting entities.

A) Conversion
B) Transporting
C) Translation
D) Emerging

Question 12

The currency in which an enterprise prepares its financial statements is the

A) local currency.
B) historical currency.
C) functional currency.
D) reporting currency.

Question 13

The major purpose of __________________ is to eliminate international double taxation and render mutual assistance in tax enforcement and in reducing barriers to trade and investment.

A) tax havens
B) tax shelters
C) tax treaties
D) mutual funds

Question 14

A geographical location in which taxation is substantially lower than that in a home country is known as a

A) tax haven.
B) tax shelter.
C) tax reservation.
D) corporate shelter.

Question 15

An agreement between the tax authority and the taxpayer on the transfer pricing methodology to be applied to any apportionment of income, deductions, credits, or allowances between two or more members of an organization is known as

A) corporate agreement.
B) advance pricing agreement.
C) globalization agreement.
D) taxation agreement.

Question 16

__________________ refers to the pricing of goods and services that are transferred between members of an MNE network.

A) Supply pricing
B) Competitive pricing
C) Transfer pricing
D) Global pricing

Question 17

The purpose of the ____________________ is to restrict the benefits of transfer pricing.

A) arm's length principle
B) current open market principle
C) international trade regulations
D) NAFTA

Question 18

In order to reduce the risk from a transfer pricing/tax audit, many companies adopt an _______ with the tax authorities.

A) advance pricing agreement
B) tax agreement
C) international tax agreement
D) advance ticketing agreement

Question 19

Accounting standards vary according to ownership types, in theory.

A) centrally-planned economy
B) continental zone
C) accounting zone
D) transitional economy zone

Question 20

The major purpose of international _____________ is to eliminate international double taxation and render mutual assistance in tax enforcement (e.g., preventing tax evasion) and in reducing barriers to trade and investment.

A) tax treaties
B) tax heaven
C) tax strategy
D) none of the above

Question 21

Countries that offer tax heavens (relatively low tax rates) are

A) British Virgin Islands.
B) The Channel Islands.
C) Angola and the Netherlands Antilles.
D) all of the above

Question 22

Egalitarian-authoritarian political system is often found in which of the following countries?

A) North Korea
B) North America
C) Australia
D) All of the above

Question 23

Liberal-democratic system is often found in which of the following countries?

A) Western Europe
B) North America
C) Japan and Australia
D) all of the above

Question 24

Which of the following is a part of economic structure that influences how accounting issues are handled?

A) pensions
B) retained earnings, dividends, depreciation
C) research and development (R&D) cost amortization
D) all of the above

Question 25

A major weakness under this method is the treatment of inventory and long-term debt.

A) current/non-current method
B) monetary/non-monetary method
C) accounting method
D) transitional method

Question 26

An example of a country that is comprised by the continental accounting model is

A) France.
B) Hungary.
C) North Korea.
D) Jamaica.

Question 27

An assumed example of cash under the temporal method in dealing with translation

A) current rate.
B) historical rate.
C) credit.
D) discount rate.

Question 28

An example that may use international accounting standards at the same time they accept and use national standards is

A) IAS.
B) CEU.
C) IFAC.
D) MNE.

Question 29

An example of a country that is comprised by the British-American accounting model is

A) Mali.
B) Cuba.
C) Zimbabwe.
D) Austria.

Question 30

The functional currency of an automobile factory in operating in Japan would probably be

A) U.S. dollar.
B) Euro.
C) Japanese Yen.
D) British pound.

Question 31

A textile company might open a factory in the Virgin Islands to

A) get away from annoying people.
B) go scuba diving.
C) receive tax benefits.
D) find attractive employees.

Question 32

Nike's assembly subsidiary in Thailand whose function is to assemble shoes that will be exported to the United States uses the _______________ as its functional currency.

A) U.S. dollar
B) British pound
C) Thailand Baht
D) Japanese Yen

Question 33

It is said that in _______________ nations, accounting is oriented toward the decision needs of investors and creditors.

A) Anglo-Saxon
B) British-American
C) South American
D) Democratic governed

Question 34

All translations of foreign currencies will inevitably result in __________ or ______________ associated with translation adjustment.

A) currency, deposits
B) gains, losses
C) inflation, stable
D) rates, discounts

Question 35

_________________ involve accounting-related reporting system, data management, and communication between various units under an intra-MNE structure.

A) International accounting information systems
B) Management information systems
C) National auditing systems
D) Corporate mergers

Question 36

Low tax rates in many countries often compel MNEs to incorporate or register a company in a tax haven.

Question 37

The idea of the tax credit is that a company can reduce its tax liability by the amount of the credit.

Question 38

In theory, the legal system determines the extent to which company law governs the regulation of accounting.

Question 39

Foreign currency translation is perhaps the most prominent accounting issue that directly and significantly affects the results revealed in MNE's financial statements.

Question 40

Cultural dimensions at the national level, initially identified by Heckscher, that are particularly relevant to accounting development are "uncertainty avoidance" and "individualism".

Question 41

Tax authorities are requiring more financial documentation, issuing more comprehensive audits, and imposing more harsh penalties for the abuse of transfer pricing.

Question 42

Tax authorities are not concerned with the potential tax revenue loss associated with transfer pricing.

Question 43

Transfer pricing does not allow a party to profit from controlling the joint venture's import and export activity.

Question 44

Transfer pricing may be used to offset the volume effects of foreign exchange quotas.

Question 45

The arm's-length principle refers to the principle that the transfer price struck between related companies should be the same as that negotiated between two independent entities acting in an open market.

Question 46

The accounting profession is influential because the way in which the profession is organized and society's attitude towards accountants affects their ability to control or audit the behavior of companies and their reporting systems.

Question 47

In countries like India and Hong Kong, public accounting reports are used as basis for determining tax liabilities.

Question 48

In most countries with a legalistic orientation, accounting principles are national laws in the way that accounting practices are codified.

Question 49

Transactions whose terms are stated in a currency other than the entity's functional currency are translation adjustments.

Question 50

Tax havens have been deemed illegal by the U.S. Congress.

Question 51

Transfer pricing does not help lower a company's income tax.

Question 52

A tax treaty helps eliminate international double taxation.

Question 53

A country's accounting system is shaped by institutions, societal culture, and internal relations with other countries.

Question 54

The taxation system theory states the importance of accounting systems being strongly influenced by state objectives.

Question 55

In a high uncertainty avoidance country, institutions will be organized in ways that minimize individualism.

Question 56

The accounting system in the centrally planned economies, in which central governments control production and resources of most enterprises, is characterized by high uniformity.

Question 57

"Owner's equity" in state-owned enterprises actually reflects "state's equity" or "governmental equity."

Question 58

Industrial structure affects the inconsistency of accounting standards and practices among different industries.

Question 59

Economic structure influences how such accounting issues as pensions, retained earnings, dividends, depreciation, and research and development (R&D) cost amortization are handled.

Question 60

Developed countries often enjoy from low inflation and thus tend to view inflation accounting with suspicion.

Question 61

A country's economic system factors, such as the level of inflation, economic and industrial structures, and the complexity of business organizations, affect the accounting system.

Question 62

Laws in codified Roman law countries are a series of "thou shalts" that stipulate the minimum standard behavior expected.

Question 63

The most common system in place in Western Europe, North America, Japan, and Australia, for instance, is the liberal-democratic system.

Question 64

The complexity of business organizations that dominates the economy impacts the internal accounting information system and management accounting.

Question 65

As inflation rates increase, the problems of historical cost accounting also increase.

Question 66

A pharmaceutical company might open a subsidiary in Bermuda to receive a huge tax break.

Question 67

Due to the tax haven qualities of Bermuda, it has become home to many U.S. businesses.

Question 68

Global Communication Inc. might adopt an advance pricing agreement to avoid the risk of an audit.

Question 69

Transfer pricing is always beneficial to an entity when selling products.

Question 70

Historically, the external relation colonies adopted or were forced to adopt the accounting system of the colonial power, even though it may not have been appropriate at their stage of development.