Deck 7: International Accounting Standards and Global Convergence

Question 1

The OECD Guidelines for Multinational Enterprises has the aim of strengthening confidence between MNEs and governments.

Answer 1

True

Question 2

Which of the following is true concerning the impact of the United Nations on accounting?

A) The U.N. generally represents the wishes of industrial countries.
B) It has been more effective at monitoring accounting practices than at setting accounting standards.
C) It has not been able to establish guidelines for accounting practices due to internal disagreements.
D) It has been interested in nonfinancial rather than financial disclosures.

Answer 2

B

Question 3

The Vredeling proposals called for the regular provision of information about MNE subsidiaries.

Answer 3

True

Question 4

International accounting firms are not active in the international harmonization of accounting and reporting.

Question 5

Which of the following is true concerning the pressures for information disclosure?

A) Companies are not overly concerned about the demand for disclosure due to increasing sophistication of information systems.
B) The internationalization of capital markets is leading to the demand for more comparable information.
C) Corporate annual reports contain sufficient information for all user groups.
D) The simplification of information is leading to greater understandability of financial statements.

Question 6

The European Union and the Organization for Economic Cooperation and Development differ from each other in terms of their accounting harmonization efforts, because

A) the OECD represents primarily developing countries, whereas the EU represents industrial countries.
B) the EU has the force of law behind it, whereas the OECD can only recommend disclosure practices.
C) the EU is involved only in measurement, whereas the OECD is only interested in disclosure.
D) the OECD represents the profession, whereas the EU represents governments.

Question 7

In the European Union, the Fourth and Seventh Directives effectively allow corporations a choice of accounting alternatives in many instances.

Question 8

Which of the following organizations has been the most effective government organization at harmonizing accounting practices?

A) the United Nations.
B) the Organization for Economic Cooperation and Development.
C) the International Accounting Standards Committee.
D) the European Union.

Question 9

When comparing disclosure practices of MNE worldwide,

A) very few firms other than those in Anglo-Saxon countries provide a review of business.
B) Europeans tend to disclose more information about employees than do U.S. firms.
C) stock market pressures are not as important a source of influence on corporate review information as are employees and governments.
D) none of the above.

Question 10

Pressures for harmonization of international accounting as means to achieve comparability are growing.

Question 11

Which of the following is true concerning the demand by governments for information?

A) Intergovernmental organizations are better than individual countries at gaining access to better information from MNEs.
B) Governments have not been very active in leading the call for better information.
C) Governments are relatively pleased with the quality of the information that they can extract from MNEs to evaluate their impact on countries.
D) Since all government agencies need the same information from MNEs, it is highly efficient to use published annual reports.

Question 12

As a result of the call for harmonization and better disclosure,

A) global investors are now able to make more informed international comparisons.
B) governments are better able to understand and constrain the activities of MNEs.
C) different information needs between and within groups may lead to conflicting demands for information.
D) all of the above.

Question 13

According to the 4th Directive of the EC,

A) the "true and fair view" must be used by countries that do not have an adequate companies law.
B) accounting directives must be adopted by the accounting profession rather than included in national law.
C) all companies, regardless of size, will have to use the same financial statement formats.
D) EU companies must now adopt more similar approaches to information disclosure, classification and presentation of information, and methods of valuation.

Question 14

International trade union organizations try to get MNE transfer pricing policies.

Question 15

Trade unions tend to be grounded in a national territory.

Question 16

Trade unions are not one of the major participant groups influencing MNE information disclosure.

Question 17

Major user groups

A) agree on what information disclosures should be mandatory
B) can enforce compliance with standards
C) do not all agree on what information disclosures should be mandatory
D) none of the above.

Question 18

The SEC does not now require the reconciliation of IFRS financial statements to US GAAP.

Question 19

Disclosure levels vary across the world's stock markets but

A) disclosure in the U.S. is among the lowest. b disclosure levels in the U.K. ranks among the highest.
C) Swiss disclosure levels are the highest in the world.
D) German disclosure levels are comparable with the U.S.

Question 20

The UN group of experts ISAR was formed to deal with the information overload from MNEs.

Question 21

IOSCO is

A) a part of the UN
B) a relic of the European customs union
C) an organization of securities market regulators
D) a group of accountants

Question 22

According to the 7th Directive of the EU,

A) worldwide consolidation is required.
B) companies are required to consolidate domestic but not foreign subsidiaries.
C) a group is defined by share ownership and legal rights rather than by effective management control.
D) the equity method cannot be used for accounting for affiliates.

Question 23

The International Accounting Standards Committee:

A) has a IASC standard for everything at this point.
B) has a compliance problem.
C) is primarily supported by the EU financing.
D) exists to help corporations get higher stock prices.

Question 24

The IASC stated objectives are to
I) formulate and publish in the public interest accounting standards
II) work for the improvement and harmonization of regulations
III) try to raise stock prices

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

Question 25

Investors have problems with MNE financial statements because

A) worldwide consolidations are not the norm in all countries
B) competitive effects of other investors
C) FASB is the principal source of GAAP
D) governments ask for comparability

Question 26

According to the 4th Directive of the EU,

A) companies must use the horizontal format for the balance sheet.
B) the vertical balance sheet includes current liabilities with current assets.
C) companies must report a cost of goods sold.
D) all personnel expenses must be included as a separate line item on the income statement due to the strength of unions in Europe.

Question 27

Trade unions do not want accounting information for interfirm comparisons, but for

A) specific line item analysis
B) policy formulation
C) checking MNE labor law violations
D) tax avoidance

Question 28

All of the following are trade unions except

A) ETUC
B) ICFTU
C) WCL
D) IASC

Question 29

Which of the following is an example of a group involved in harmonization of accounting that represents the accounting profession?

A) the IASC.
B) the EU.
C) the OECD.
D) the UN.

Question 30

The International Accounting Standards Committee requires the following segment information:

A) There is no IASC standard at this point.
B) sales and profits by line of business.
C) sales but not profits for geographic areas.
D) sales but not profits for line of business.

Question 31

According to the 4th Directive of the EU, the operational basis for the income statement means that

A) a horizontal format must be used.
B) there is a separate line item for staff costs.
C) depreciation is considered a liability.
D) cost of goods sold is presented as a line item.

Question 32

Following the issuance of several directives in the EU, including the 4th, 7th and 8th, it appears that

A) the EU is ready to issue a series of new accounting regulations.
B) Europeans prefer to have a set of standards that all countries would follow rather than the current level of flexibility.
C) stock exchanges are losing their influence.
D) mutual recognition of each other's accounting standards and practices is becoming the norm.

Question 33

A main information concern of trade unions is

A) transfer pricing
B) inflation data
C) production quotas
D) stock prices

Question 34

According to the IASC's project on "Comparability of Financial Statements,"

A) most of the choices of accounting treatment currently permitted under International Accounting Standards have been eliminated.
B) all alternative treatments to accounting issues must be eliminated.
C) global securities exchanges are required to use IASC standards.
D) firms desiring to list on global exchanges must have financial statements that are comparable to national firms listed on the same exchanges.

Question 35

Trade unions want accounting information

A) for cost-volume profit analyses
B) to make sure MNEs pay proper taxes
C) for contract bargaining purposes
D) to facilitate outsourcing

Question 36

Analysis of MNE aggregate results requires knowledge of the component parts of the following except

A) certification of the COFRI
B) profitability
C) degree of risk
D) potential for growth

Question 37

Investors are concerned about

A) up-to-date measurements of earnings
B) lack of comparability of MNEs
C) the informational content of MNE reports
D) all of the above