Question 1

Which of the following factors has NOT influenced the development of accounting practices in various nations?

Accepted Answer

All of these factors have influenced the development of accounting practices. The political environment, economic development, and cultural background are all significant factors that have played a role in the development of accounting practices in different nations. For example, countries that have experienced rapid economic growth may require more sophisticated accounting methods to manage their financial transactions, while countries with different cultural beliefs may have distinct regulatory standards for financial reporting.

Question 2

How does a multinational corporation differ from a domestic firm involved in international business?

Accepted Answer

A multinational firm has operations in several countries. These firms are involved regularly in manufacturing and/or distribution in a variety of nations. Multinational firms participate in international sales, labor, and capital markets.
Domestic firms involved in international business participate in foreign markets to a lesser degree. For example, a firm may be involved in sales only on an international level. Another firm may be involved in sales, labor, and capital marketing, but only occasionally.

Question 3

Which of the following is not an objective of the International Accounting Standards Board (IASB)?

Accepted Answer

While the IASB aims to create high-quality accounting standards, its objectives do not include establishing legally enforceable standards. Rather, the IASB works to promote the use of a single set of high-quality global accounting standards.

Question 4

The International Accounting Standards Board (IASB) works to formulate international accounting standards that are adopted by each country

Accepted Answer

International accounting standards formulated by IASB are adopted on a voluntary basis. Each country can choose to adopt them or not. There is no requirement for approval by the IASB or acceptance by a majority of member countries, nor is there a set threshold of member country acceptance.

Question 5

A manufacturer produced a good with a value of 300, the retailer added 140 to the value of the good. Assuming the value added tax rate is 10% the final price to the consumer would be

Accepted Answer

First, we add the value added by the retailer to the original value of the good:

300 + 140 = 440

Then, we calculate the value added tax (VAT) at a rate of 10%:

VAT = 0.1 x 440 = 44

Finally, we add the VAT to the price:

Price = 440 + 44 = 484

Question 6

Which of the following accounting situations is treated virtually identically under both U.S. and International accounting standards?

Accepted Answer

Earnings per share is treated virtually identically under both U.S. and International accounting standards because it is a measure of a company's profitability that is calculated using the same basic formula in both sets of standards.

Question 7

A value added tax generally results in

Accepted Answer

A value added tax is applied at each stage, from production to final sale. This means that the tax is added on to the value of the product or service at each step in the supply chain, rather than just at the wholesale or retail level. This approach helps to ensure that all buyers and sellers in the supply chain pay a fair share of the tax.

Question 8

A manufacturer produced a good with a value of 250, the retailer added 125 to the value of the good. Assuming the value added tax rate is 15% the net value added tax due to the government by the retailer is

Accepted Answer

The retailer's value added is 125, and the VAT on this is 125 * 15% = 18.75.

Question 9

The Internal Revenue Code regulates transfer pricing in the United States by encouraging the use of a transfer price that

Accepted Answer

The Internal Revenue Code encourages the use of a transfer price that reflects what the price would have been if the underlying transaction was between unrelated parties, known as the arm's length standard. This ensures that transfer pricing is not used as a tool for shifting income to low-tax jurisdictions.

Question 10

The most significant difference between accounting principles used in Brazil and those employed in the United States is

Accepted Answer

Accounting for inflation is a significant difference between accounting principles used in Brazil and the United States. In Brazil, companies are required to adjust their financial statements for inflation using the IGP-M (General Market Price Index) or IPCA (Consumer Price Index for Brazil) methods, whereas the US does not require such adjustments. This can significantly affect the reported values of assets, liabilities, and income in a company's financial statements.

Question 11

The Securities and Exchange Commission requires foreign companies seeking to sell securities on U.S. stock markets to

Accepted Answer

Foreign companies must reconcile their financial statements to U.S. GAAP to ensure consistency and comparability for investors in the U.S. markets.

Question 12

Parent Corporation is located in a country with an income tax rate of 40%. Subsidiary Company is located in a country with an income tax rate of 25%. The best tax strategy for the enterprise would be to set the transfer prices on sales of goods from the subsidiary to the parent at a price that is

Accepted Answer

Setting a higher transfer price allows more profit to be recognized in the subsidiary's country, which has a lower tax rate, thus minimizing the overall tax burden for the enterprise.

Question 13

Which of the following would not be an advantage to American investors that would result from the harmonization of accounting standards?

Accepted Answer

Accounting principles being more responsive to national politics would not be an advantage to American investors. In fact, it could potentially harm investors as accounting standards may be influenced by political factors rather than economic reality or investor needs. The other choices are advantages of harmonization of accounting standards.

Question 14

The main difference between U.S. accounting standards and international accounting standards when accounting for plant, property and equipment is

Accepted Answer

International accounting standards allow plant, property, and equipment to be stated at current fair value with changes recognized in income or equity, whereas U.S. accounting standards do not permit the use of fair value to measure these assets. Additionally, U.S. accounting standards do allow for the recognition of impairment losses on long-lived assets, while international accounting standards do not permit such write-downs for plant, property, and equipment.

Question 15

Which of the following statements best differentiates multinational firms from domestic firms?

Accepted Answer

The answer of Which of the following statements best differentiates...

Question 16

How does the International Federation of Accountants (IFAC) differ from the International Accounting Standards Board (IASB)?

Accepted Answer

The IFAC is more concerned with encouraging the harmonization of accounting principles than with standard setting. The IASB, on the other hand, is responsible for developing and promoting international financial reporting standards. Adherence to both IFAC and IASB standards is voluntary. The IFAC is not dominated by the European Community, as it represents accountants and accounting organizations from around the world.

Question 17

Why would a U.S. manufacturing firm select a foreign site for one of its plants?

Accepted Answer

All of these factors could influence a firm's decision to manufacture overseas. A company may choose to locate a plant in a foreign country if it is closer to the product market area, if the labor costs are more favorable, or if the tax environment is more attractive. Additionally, other factors such as access to natural resources, political stability, and availability of skilled labor may also play a role in the decision-making process.

Question 18

Which of the following has not led to an increase in the demand for audited financial statements?

Accepted Answer

An increase in global tax rates is unlikely to lead to an increase in demand for audited financial statements, as tax rates and financial reporting are not directly related. However, growth in the corporate form of business, an increase in global capital needs, and an increase in investor bases are all factors that could lead to an increase in demand for audited financial statements.

Question 19

Which of the following accounting methods, commonly employed in the United States, is discouraged by the IASB?

Accepted Answer

The IASB discourages the use of LIFO inventory valuation method, primarily because it does not reflect the actual movement of inventory and can result in inventory valuations that are not representative of a company's financial position.

Question 20

Which of the following accounting areas is NOT significantly affected by international activity?

Accepted Answer

Overhead allocation is not significantly affected by international activity as it is a more internal accounting practice that is based on a company's individual cost structure and is less impacted by global factors. The other options (recognition principles and auditing standards) are significantly affected by international activity as they must comply with international accounting standards and regulations.

Quiz 9: The International Accounting Environment