Deck 9: International Segment Reporting

Question 1

External yardsticks are available for most diversified MNEs.

Answer 1

False

Question 2

The demand for segment information has been

A) prompted by a continuing diversification trend
B) forced by competitors
C) accelerated by class action suits
D) reduced by investors

Answer 2

A

Question 3

According to predictive ability tests of segment reports,

A) it has clearly been proven that users use disaggregated information to make forecasts.
B) forecasts based on line of business data are not as accurate as those based on geographic segments.
C) forecasts based on segment earnings are more accurate than those based on segment sales.
D) segment information is not useful for small firms.

Answer 3

C

Question 4

Segment disclosures

A) do not affect firm risk
B) increase firm risk
C) increase the MNE price variability
D) decrease the MNE price variability

Question 5

Segment identification is very easy in practice.

Question 6

Segment information is likely to help investors by allowing them to combine company-specific information with external information.

Question 7

Gaming can occur if the users of financial statements perceive the information contained in them to be a free good.

Question 8

Current international accounting standards look to the company's organizational structure and internal reporting system as the basis for identifying segments.

Question 9

Excessive costs of segmental disclosure has doubtful validity.

Question 10

Segment information

A) I only
B) II only
C) neither I or II
D) both I and II

Question 11

Segment information is typically provided for
I) Line of business
II) Geographical areas

A) I only
B) II only
C) neither I or II
D) both I and II

Question 12

Prediction of earnings studies have all concluded that forecasts are less accurate if they are based on line-of-business segmental data rather than consolidated earnings.

Question 13

US GAAP's latest SFAS131 is very similar to IASB's revised IAS 14

Question 14

Segment information is

A) very easy for MNEs to compute
B) useful because some users only want part of the MNE data
C) does not require cost allocations
D) does not concern transfer pricing

Question 15

Market risk measures are correlated to
I) Accounting-based risk measures formed from line of businesses
II) Accounting-based risk measures formed from geographical areas

A) I only
B) II only
C) neither I or II
D) both I and II

Question 16

A major value of segment information for users is that

A) it focuses on issues other than cash flows.
B) in the United States, GAAP requires firms to disclose segment information by major country.
C) it provides information to investors that might involve cost of preparation but not cost of competitive advantage.
D) it allows users who have different information needs to get disaggregated information that might be of use to them.

Question 17

MNEs argue against disseminating more information because a competitive disadvantage.

Question 18

Segment-based forecasts

A) underperform consolidated-based forecasts
B) out perform consolidated-based forecasts
C) do not depend on firm size
D) do not apply to OECD MNEs

Question 19

The revised IAS 14 expands the scope of managerial discretion in segment identification.

Question 20

Evidence about stock market tests of segment information

A) is presently subject to uncertainty
B) find no value to line of business disclosures
C) has yet to be produced
D) only applies to profits

Question 21

The major problem for an auditor of segment information:

A) is that 50 percent of sales is not always sold externally.
B) is that sales and profits are given by line of business, but sales only for geographic segments.
C) is segment identification
D) is that profits are given by geographic area but not line of business.

Question 22

The IASB's segment reporting standard IAS 14

A) gives management more discretion to identify geographic segments.
B) has primary segment which has higher disclosure requirement.
C) prohibits a matrix approach.
D) restricts the criteria for identifying segments to assessing "risks and returns".

Question 23

A major difference between U.S. segment disclosures and those of other countries is that

A) U.S. companies tend to disclose more segments on average than do U.K. companies.
B) U.K. companies have several different sources of standards, whereas U.S. companies only have to worry about the FASB.
C) U.K. company law gives significant direction to companies on establishing segments, whereas the FASB gives no discretion to management on the establishment of segments.
D) U.S. companies have to report geographic sales by source and destination, whereas British companies are only allowed to report geographic sales by destination.

Question 24

The European Union requires the following segment information:

A) sales and profits by line of business only.
B) sales and profits by line of business, but sales only for geographic segments.
C) sales by line of business and geographic area.
D) profits by geographic area but not line of business.

Question 25

The dual-yardstick proposal for segment disclosures

A) suggests that segments be established consistent with the company's organizational structure.
B) suggests that industry and country groupings be related to each other rather than an external standard.
C) requires geographic segmentation along country lines.
D) requires that geographic and industry data be combined together in a matrix reporting format.

Question 26

According to the British approach to segment disclosures,

A) the Companies Act requires line of business sales but not geographic sales.
B) there is significant guidance as to what is material or what a reportable segment is.
C) the London Stock Exchange requires that firms provide geographic segments by country.
D) SSAP 25 requires geographic segments by source and destination.

Question 27

The major argument against segment disclosure is that

A) data collection costs are high
B) that competitors will take advantage of the data
C) earnings conservatism will be affected
D) in some cases it may be inappropriate and misleading

Question 28

MNEs often make the argument against segment disclosure that

A) economic efficiency will result
B) they will be put at a competitive disadvantage
C) there will be an affect on global comparative advantage
D) turnover rates will decrease

Question 29

US SFAS 131 reportable segments may be reported on
I) Accounting-based risk measures formed from line of businesses
II) Accounting-based risk measures formed from geographical areas
III) A combination of I and II

A) I only
B) II only
C) I and II
D) I, II and III

Question 30

US SFAS 131

A) is very similar to the IAS 14
B) was created ten years before the IAS 14
C) concerns mergers and acquisitions
D) does not require sales information by segments

Question 31

Most corporations do not provide segment reponting

A) for LOB information separately
B) for LOB information in matrix form
C) of sales data
D) identified by SIC

Question 32

A problem with segment disclosure is that

A) IAS 14 has been rejected by MNEs
B) there are too many segments
C) segment reporting is only within the UK scope of the audit
D) management will be disclosing its own view of segments with significant differences in risk and return

Question 33

From a competitive standpoint, segment reporting

A) is closer to a level playing field for single industry or single country firms.
B) does not create problems since most countries have similar reporting requirements.
C) creates a real cost of compiling, processing and disseminating information.
D) requires the disclosure of business dealings with major competitors.

Question 34

According to U.S. and British companies, narrowly-defined line of business and geographic segments are

A) a cost of preparation but not a cost of competitive disadvantage.
B) difficult to determine because of their highly aggregated organizational structures.
C) easy to determine, because they only have to report sales data.
D) a competitive disadvantage cost since not everyone in the world has to account for segments the same way.

Question 35

The IASB's segment reporting standard IAS 14

A) gives management more discretion to identify geographic segments.
B) bases its requirements on the company's organization structure and internal reporting system.
C) contradicts proposals for reform issued by the FASB.
D) restricts the criteria for identifying segments to assessing "risks and returns".

Question 36

A major argument against segment disclosure is that

A) gross margins will fall
B) transfer pricing activity will increase
C) in some cases it may be misleading
D) MNEs will have to do more mergers

Question 37

Which of the following is not a major problem for segment reporting?

A) There are problems with verification of information.
B) There are problems with segment identification.
C) The greater the disaggregation, the more likely the need to allocate common costs, which could distort profits.
D) U.S. firms do not provide much information about their segments.

Question 38

Which of the following is true concerning segment disclosures?

A) The European Union requires sales but not profit data by segments.
B) Forecasts based on consolidated data are more accurate than those based on segmented data due to intercompany transfers.
C) The U.S. requires extensive social disclosures of its segmented data.
D) The British require segment sales based on source but not destination.

Question 39

Segment disclosure should not be expensive because of

A) worldwide business activity
B) stock market analysts
C) resultant lower leverage
D) computer systems

Question 40

Eliminations are

A) are a necessary part of segment reporting
B) only required in consolidations
C) not required in segment reporting
D) are being considered in an IASC proposal