Deck 6: International Transparency and Disclosure

Question 1

The concept of user comprehension implies that

A) understandability is improved with more information.
B) greater information is making financial analysis more complex.
C) the simplification of annual reports is leaving out information not necessary for financial analysis.
D) all of the above.

Answer 1

B

Question 2

There are direct and indirect costs of disclosure.

Answer 2

True

Question 3

The disclosure of information that would help another firm know more about your firm would be an example of

A) the direct cost of disclosure.
B) the cost of information production.
C) the cost of competitive disadvantage.
D) why government needs to regulate accounting disclosure.

Answer 3

C

Question 4

There is growing evidence that corporate reports are neither read or understood by a considerable percentage of the target audience.

Question 5

Which of the following is true concerning managerial incentives to disclose information?

A) More information increases uncertainty about financial performance.
B) More disclosure increases the cost of capital, causing stock prices to fall.
C) Information disclosure is usually neutral.
D) More information usually helps managers get better access to external capital.

Question 6

In cross-border contexts, voluntary disclosures are forthcoming when corporations are competing for finance from investors.

Question 7

Because of the Internet, transparency has become less important over time.

Question 8

Which of the following are considered by managers to generate the greatest cost of competitive disadvantage?

A) line of business profits, narrowly defined.
B) inflation adjusted profits.
C) a description of organizational structure.
D) quarterly interim financial statements.

Question 9

The value of the annual report as opposed to just the financial statements is that

A) the annual report must contain a quantitative forecast of earnings.
B) management can provide a good qualitative discussion of the financial information.
C) financial information is usually not very accurate, so potential investors can rely more on management impressions.
D) management is more likely to provide more financial information in its annual report than it is in its financial statements.

Question 10

There is a positive correlation between corruption and accounting standards.

Question 11

Annual report disclosure appears to be a necessary, but not sufficient component of corporate transparency.

Question 12

Simplifying information in annual reports

A) may increase the size of annual reports.
B) could decrease the cost of capital.
C) could reduce the readership of financial reports.
D) may result in the omission of essential information useful to the direct users.

Question 13

Transparency

A) is consistent with confidentiality
B) is not an issue if the corporate report has reliable information
C) helps investors distinguish between good and bad quality firms
D) associates directly with the level of corruption

Question 14

Subsequent to the Asian "flu" financial crisis, voluntary disclosure increased in Indonesia.

Question 15

The increased supply of financial information by MNEs appears to have

A) satisfied labor unions but not governments.
B) resulted in more precise disclosure requirements by governments.
C) resulted in the demand for additional information.
D) resulted in a greater simplification in financial statements.

Question 16

As of 2005 only a small percentage of the Global 500 provide financial statements on the Internet.

Question 17

Increasingly, many MNEs provide social responsibility information reports.

Question 18

MNEs provide more information in their annual reports than regulations require.

Question 19

All of the following international organizations are now issuing more detailed accounting requirements except

A) PGA
B) UN
C) OECD D. IASC

Question 20

The recent Asian financial crisis

A) might have been prevented with decreased transparency
B) was the result of inconsistent accounting standards
C) could have been prevented with better computer systems
D) might have been prevented with increased transparency

Question 21

In terms of Research and Development (R&D) and capital investments,

A) few firms disclose R&D information.
B) Germany, Japan, the Netherlands, Switzerland, and U.K. all exhibit higher levels of disclosure in both R&D and investment programs than most other countries.
C) all firms are required by the U.N. to disclose their capital investment program, and compliance is quite high.
D) it is very common for companies to disclose their investment program by geographical area.

Question 22

The indirect costs of disclosure involve the

A) threat of takeover or merger.
B) cost of data collection and processing.
C) cost of auditing.
D) cost of publication.

Question 23

The overall quantity and levels of disclosure

A) is generally similar across the world
B) is the lowest in London
C) is the highest in Switzerland
D) has significant variation in the world

Question 24

Information regarding to future prospects

A) is rarely provided in annual reports.
B) is usually in the form of a narrative rather than in quantitative terms.
C) is not considered to be a threat from a competitive disadvantage point of view since all firms are required to disclose this information if they list on a stock exchange.
D) is not very high in the United States due to the investor orientation.

Question 25

The value added statement

A) provides information about the contribution of all corporate stakeholders to the success of the business.
B) is used to determine how much value-added tax corporations pay.
C) is generated primarily for potential investors and shareholders.
D) is provided by the majority of European companies, although it is rarely provided by U.S. firms.

Question 26

Which country provides segment disclosure on a basis of managerial organization

A) UK
B) Japan
C) Italy
D) US

Question 27

The overall amount of voluntary disclosures is

A) highest from continental European companies
B) highest from US companies
C) highest from UK companies
D) lowest from continental European companies

Question 28

The direct costs of disclosure involve the

A) threat of takeover or merger.
B) cost of data collection and processing.
C) possibility of intervention by government agencies.
D) possibility of claims from political or consumer groups.
E) all of the above.

Question 29

Competitive disadvantage

A) of increased disclosure will likely increase business incentives in the long term
B) affects the cost of data collection and processing.
C) is the most important cost factor in voluntary disclosures
D) increases direct disclosure costs

Question 30

The cost of audit and communication is an example of

A) the direct costs of disclosure.
B) cost of competitive disadvantage.
C) indirect costs of disclosure.
D) the benefits of increased disclosure.

Question 31

In terms of the financial review,

A) it is not very common for companies to provide an analysis of results.
B) U.S. companies tend to provide more detailed information in their financial review, especially with regard to events having a potential impact on earnings.
C) most companies analyze their asset values and the impact of inflation on values.
D) very few companies analyze liquidity and capital resources.

Question 32

In terms of segment information,

A) segment reviews of operations are not very well established.
B) segment disclosures are required by the U.N. but only recommended by the EU.
C) it is common to find a review of business segments.
D) the review of business segments rarely provides information in excess of the actual segments.

Question 33

Inflation accounting

A) is given by most MNEs
B) is required in Japan
C) is found in South America
D) is required in US GAAP

Question 34

Social responsibility information

A) focuses on accountability to society as a whole rather than just employees.
B) deals with issues other than community welfare, public safety, and the environment.
C) is easy to provide, since firms can easily measure the costs and benefits of providing the information.
D) all of the above.

Question 35

The mutuality of interests concept related to information disclosure implies that

A) disclosure may help users be more aware of common interests, improving cooperation.
B) increased disclosure increases uncertainty about financial performance.
C) user benefits always exceed costs.
D) it is difficult to measure the costs and benefits of disclosure.

Question 36

A mission statement

A) is what the chair person gives
B) is part of a capital expenditure program
C) is increasingly included in a review of corporate strategy and results
D) is included with other value-added information

Question 37

Human resource information

A) is essential for investors and shareholders.
B) especially in the area of labor and employment is more detailed and helpful in U.S. reports than in European reports.
C) is provided in a format that is required by the IASC.
D) none of the above.

Question 38

Segment reviews of operations on a geographical basis are

A) usually incorporated in the review of business segments.
B) separately discussed by a majority of MNEs. . rarely provided by MNEs.
) provided by most MNEs except those from Japan.

Question 39

The EU 4th and 7th Directives require

A) the quantification of a forecast of earnings.
B) the discussion of R&D analyzed by product.
C) an indication of important events since the end of the year and any likely future development.
D) any environmental measures taken.

Question 40

Why does Switzerland have one of the lowest levels of disclosure

A) the size of the market is very high
B) the size of the market is small
C) a sophisticated regulation system
D) secrecy is highest

Question 41

Canada

A) makes no requirement how often reports must be issued
B) requires half yearly reports
C) requires annual reports
D) requires quarterly reports

Question 42

Which of the following are considered by managers to generate the greatest net costs?

A) a description of major environmental projects.
B) geographical sales, broadly defined.
C) a description of major new products.
D) inflation adjusted profits.

Question 43

The EU Directive on Interim Reports

A) makes no requirement how often reports must be issued
B) requires half yearly reports
C) requires annual reports
D) requires quarterly reports

Question 44

In terms of interim reports,

A) the EU 4th Directive requires that companies disclose quarterly reports.
B) a major difference between the U.S. and Canada is that the U.S. requires quarterly reports, but the Canadians follow the European tradition of not requiring quarterly reports.
C) EU companies are required to provide semiannual reports of abridged information.
D) the SEC requires all foreign firms that list in the United States to provide quarterly earnings information.

Question 45

In terms of interim reports,

A) the IASB requires that companies disclose quarterly reports.
B) the European tradition has always required quarterly reports.
C) the IASB specifies content, but does not specify frequency.
D) very few MNEs provide information beyond the EU directive