Question 1

All of the following statements are true about inflation except
A)U.S.companies no longer present financial information adjusted for the effects of inflation.
B)in recent years,inflation has been more rampant in Latin America and South America than the rest of the world.
C)the FASB developed rules for companies in the United States to use to adjust for inflation.
D)the United States and Germany adjust their financial statements for inflation.

Accepted Answer

The United States and Germany do not typically adjust their financial statements for inflation. This practice is more common in countries experiencing high inflation rates, but it is not a standard approach in the U.S. or Germany.

Question 2

Which of the following countries do not use a common law system?
A)United States
B)Germany
C)United Kingdom
D)United States and United Kingdom

Accepted Answer

Germany does not use a common law system. Instead, it uses a civil law system based on codes and statutes. The United States and the United Kingdom, on the other hand, do use common law systems.

Question 3

The state of economic development can affect accounting standards.

Accepted Answer

Different countries may have different levels of economic development and varying institutional settings, which may lead to different needs, preferences, and capabilities for financial reporting. As a result, accounting standards can be influenced by the state of economic development in a given country or region. For example, developing countries may focus more on basic accounting requirements, while developed countries may have more sophisticated and complex accounting standards that reflect their more comprehensive business environments. Similarly, the level of legal enforcement, corporate governance, and investor protection can shape the design and implementation of accounting standards in different contexts.

Question 4

Regarding the valuation of operating assets,IFRS allow companies to use fair value.

Accepted Answer

IFRS allows companies to use fair value as a valuation method for their operating assets. However, companies must meet certain criteria and disclose information about the fair value measurement.

Question 5

U.S.GAAP requires companies to present a balance sheet with classifications for current and long-term liabilities,while IFRS do not.

Accepted Answer

Both U.S. GAAP and IFRS require the classification of liabilities as current or non-current on the balance sheet.

Question 6

The U.S.accounting standards are more principle-based than IFRS.

Accepted Answer

The U.S. accounting standards are generally considered to be more rules-based, while IFRS (International Financial Reporting Standards) are more principle-based. However, this distinction is becoming increasingly blurred, as both standards have been converging towards a more principles-based approach in recent years.

Question 7

Japan has a greater number of differences than the United States between the amount of income reported to stockholders and that reported to the taxing authorities.

Accepted Answer

The United States typically has more differences due to its complex tax code and the use of different accounting standards for financial reporting (GAAP) and tax reporting (IRC).

Question 8

While U.S.GAAP requires a complete set of financial statements,including a balance sheet,statement of stockholders' equity,income statement,and statement of cash flows,IFRS do not.

Accepted Answer

This statement is false. IFRS also require a complete set of financial statements, which includes a balance sheet, income statement, statement of changes in equity, statement of cash flows, and notes to the financial statements.

Question 9

Ultimately,it will be the responsibility of the FASB in the United States to decide if the advantages of IFRS's outweigh the disadvantages.

Accepted Answer

The answer of Ultimately,it will be the responsibility of the...

Question 10

Both U.S.GAAP and IFRS apply the lower-of-cost-or-market rule in a similar manner to inventory.

Accepted Answer

Under U.S. GAAP, the lower-of-cost-or-market rule is applied to inventory, where "market" can mean replacement cost, net realizable value, or net realizable value less a normal profit margin. However, IFRS uses the lower of cost and net realizable value, without the option to use replacement cost as a measure.

Question 11

Companies in Mexico have to begin using IFRS by 2020.

Accepted Answer

Mexico has not mandated the use of International Financial Reporting Standards (IFRS) for all companies by 2020. Instead, it allows certain entities, especially those listed on the stock exchange, to use IFRS, while others may use Mexican Financial Reporting Standards (NIF).

Question 12

There is a standard format for all countries for the statement of financial position.

Accepted Answer

The format of the statement of financial position may vary from country to country depending on local accounting standards and regulations. However, certain components such as assets, liabilities, and equity are always included in the statement regardless of the country's format.

Question 13

In countries,like Japan and much of Europe,fewer differences between the amount of income reported to stockholders and that reported to the taxing authorities exist than in the United States.

Accepted Answer

This statement is true. In countries like Japan and much of Europe, there is generally less income discrepancy between what is reported to stockholders and what is reported to taxing authorities compared to the United States.

Question 14

Under IFRS,if inventory is written down to a new lower market value,this cannot be reversed in later periods.

Accepted Answer

Under IFRS, inventory write-downs can be reversed if the market value increases in later periods. The reversal cannot exceed the original write-down amount.

Question 15

Which of the following statements is true regarding common law?
A)In common law countries,there are generally more statutes written into the laws.
B)In common law countries,there is less reliance on interpretation by the courts.
C)Because more details are written into U.S.law,the FASB has shorter and more general accounting standards than most countries.
D)The common law system has its roots in the United Kingdom.

Accepted Answer

The common law system has its roots in the United Kingdom, where it began developing in the Middle Ages. In common law countries, such as the United States, Canada, and Australia, court decisions and legal precedents play a significant role in shaping the law, rather than relying solely on written statutes. Moreover, because common law is based on precedent, there may be less clarity and more interpretation required by the courts. Additionally, the FASB's accounting standards do not necessarily reflect the level of detail in U.S.law.

Question 16

Essentially,the entire statement of financial position is inverted compared to what is commonly seen in the United States.

Accepted Answer

In the United States, the statement of financial position (also known as the balance sheet) typically lists assets first followed by liabilities and equity. In contrast, in some other countries (such as the UK), the statement of financial position is often presented with liabilities and equity listed before assets. This is known as an inverted statement of financial position.

Question 17

According to the text,in economies like those that made up the former Soviet Union,accounting standards are relatively less complex due to the fact that they are just beginning to be developed.

Accepted Answer

The text states that in economies like those that made up the former Soviet Union, accounting standards are relatively less complex because they are just beginning to be developed.

Question 18

IFRS are now mandatory in all member states of the economic and political organization known as the European Union.

Accepted Answer

This statement is true. Since January 1, 2005, all EU listed companies have been required to prepare their consolidated financial statements in accordance with IFRS. Additionally, many non-listed EU companies also choose to use IFRS voluntarily.

Question 19

A single set of accounting standards could help a U.S.company save time and money in the acquisition of a German company.

Accepted Answer

Having a single set of accounting standards would make it easier for the U.S. company to understand and integrate the financial information of the German company, thereby saving time and money. If the two companies use different accounting principles, there may be additional expenses incurred for translating financial statements, analyzing differences, and reconciling accounts. A uniform set of global accounting standards can facilitate the due diligence process and simplify the post-acquisition integration of financial reporting systems.

Question 20

No single explanation can be given for the divergence of accounting standards.

Accepted Answer

The divergence of accounting standards can be attributed to various factors, including cultural, legal, economic, and political differences across countries, as well as different historical and institutional developments. Therefore, no single explanation can provide a comprehensive understanding of this phenomenon.

Quiz 14: International Financial Reporting Standards

All of the following statements are true about inflation except

Which of the following countries do not use a common law system?