Question 1

Translation of a foreign entity's financial statements into the reporting currency of a domestic entity is typically done

Accepted Answer

A foreign subsidiary's financial statements must be translated into the parent company's currency in order to be included in the parent's consolidation.

Question 2

Describe the concept of convergence as it pertains to the FASB and IASB and describe the ways in which this may be accomplished.

Accepted Answer

Convergence means that the FASB and IASB will work together to develop standards rather than the FASB merely agreeing to adopt IFRS. In essence, this will be a collaborative effort whereby IFRS may converge with U.S. GAAP, U.S. GAAP may converge with IFRS, or an entirely new standard may be generated. The parties have agreed to move toward common standards in areas that are not in need of significant improvement. If a standard is in need of significant change or improvement, the Boards will work together to develop a new common standard.

Question 3

One of the challenges facing U. S. companies adopting IFRS is:

Accepted Answer

It is expected that some U. S. companies will incur significant costs to adopt IFRS. In addition, since IFRS is more principles-based than U. S. GAAP, which is more rules-based, some subjectivity will be introduced into financial reporting. Finally, some areas, such as the LIFO method of accounting for inventory, exist where it is not known whether convergence will be achieved.

Question 4

RWB Corporation, a U. S. based company, sold inventory to a German company on June 5 for 12,000 euros, when $1 was equal to 1.20 euros. The company received 12,000 euros in payment on August 4 when $1 was equal to 1.25 euros. RWB's measurement currency is the U. S. dollar. RWB Corporation:

Accepted Answer

RWB is exposed to an economic loss as follows:
Sale on June 5: 12,000 euros / 1.20 = $10,000
Collected August 4: 12,000 euros / 1.25 = $ 9,600

Question 5

Explain the goal of harmonization of accounting standards. Why is this so important to multinational companies?

Accepted Answer

The answer of Explain the goal of harmonization of accounting...

Question 6

The process of expressing a subsidiary's financial statement amounts denominated in a foreign currency into amounts measured in the reporting currency of its parent company is referred to as:

Accepted Answer

The process of expressing a subsidiary's financial statement amounts denominated in a foreign currency into amounts measured in the reporting currency of its parent company is referred to as foreign currency translation.

Question 7

Explain the factors which have lead to the differences in accounting standards among nations.

Accepted Answer

The answer of Explain the factors which have lead to...

Question 8

A U.S. company purchases medical lab equipment from a Japanese company. The Japanese company requires payment in Japanese yen. In this transaction, the yen would be referred to as the ___________ currency.

Accepted Answer

The denominated currency is the currency used to settle the transaction, in this case, the yen.

Question 9

Which of the following is true regarding the Securities and Exchange Commission requirements from foreign companies seeking to sell securities on U.S. stock markets?

Accepted Answer

In 2007, the SEC agreed to accept financial statements from foreign registrants prepared in accordance with IFRS without reconciliation to U.S. GAAP.

Question 10

RWB Corporation, a U. S. based company, bought inventory from a German company on June 5 for 12,000 euros, when $1 was equal to 1.20 euros. The company settled its payable with 12,000 euros on August 4 when $1 was equal to 1.25 euros. RWB's measurement currency is the U. S. dollar. RWB Corporation:

Accepted Answer

RWB has an economic gain as follows:
Purchase on June 5: 12,000 euros / 1.20 = $10,000
Settlement on August 4: 12,000 euros / 1.25 = $ 9,600

Question 11

Which of the following is not a responsibility of the International Accounting Standards Board (IASB)?

Accepted Answer

The IASB is responsible for establishing a single set of international financial reporting standards and achieving convergence of national accounting standards and IFRS.

Question 12

Describe the complexities stemming from U. S.-based companies operating in an international environment.

Accepted Answer

The answer of Describe the complexities stemming from U. S.-based...

Question 13

A U.S. company purchases medical lab equipment from a Japanese company. The Japanese company requires payment in Japanese yen. In this transaction, the dollar would be referred to as the ___________ currency.

Accepted Answer

The measurement currency, in this case the dollar, is the currency used to record and measure the transaction.

Question 14

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

Accepted Answer

Items which have influenced the development of accounting practices in various nations include: social and cultural values, political and legal systems, business activities and economic conditions, standard-setting processes, forms of ownership and capital markets and cooperative efforts between nations.

Quiz 9: The International Accounting Environment