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Q:
Assume that a U.S.-based MNE has operations in Germany and that the revenues and expenses are mostly incurred in euros. Which translation method is the MNE most likely to use?
A) current-rate method
B) temporal method
C) translate-restate method
D) consolidation method
Q:
The translation method used when the functional currency is the parent currency is the ________.
A) current-rate method
B) temporal method
C) translate-restate method
D) consolidation method
Q:
Coca-Cola has subsidiaries all over the world. The process of combining the results of its far-flung operations into one set of financial statements for investors is known as ________.
A) combination
B) translation
C) consolidation
D) unification of results
Q:
Translation of foreign currency financial statements is best described as ________.
A) the process of restating foreign currency financial statements from one currency into another
B) the process of combining financial statements of different subsidiaries into one statement
C) the conversion of foreign currencies into the U.S. dollar
D) easier when the foreign currency is the euro
Q:
According to the translation process in the United States, ________.
A) companies first translate their statements into dollars, and then recast their financial statements consistent with U.S. GAAP
B) companies recast their financial statements consistent with U.S. GAAP, and then translate them into U.S. dollars
C) companies only need to worry about the translation process because local operations take place in a local GAAP environment
D) companies translate foreign currency financial statements only if the dollar is weakening against the local currency
Q:
The process of combining financial statements of different subsidiaries into one statement is known as ________.
A) conversion
B) translation
C) consolidation
D) recognition
Q:
Assume a U.S. company purchases equipment from a German supplier for 37,500 when the exchange rate at the time of the transaction is $1.5 per euro, or 0.667 per dollar. The U.S. company doesn't have to pay the German supplier until the end of the month, at which time the euro is now worth only $1.49 per euro or 0.671 per dollar. According to U.S. GAAP, the equipment would be valued at ________.
A) $25,167
B) $25,000
C) $56,250
D) $55,875
Q:
Assume a U.S. company sells merchandise to a French customer for $200,000 when the exchange rate is $1.5 per euro. At the end of the month, the euro is trading at 1.47, and in the middle of the next month when payment is received, the exchange rate is 1.53. If the U.S. company receives payment in dollars, what is the value of the sale at the end of the month for the U.S. company?
A) $200,000
B) $294,000
C) $300,000
D) $306,000
Q:
How do U.S. companies recognize transaction gains and losses in the financial statements?
A) They are recognized as gains and losses in the income statement.
B) They are recognized as gains and losses in owners' equity.
C) Gains are recognized in the income statement, but losses are not.
D) Losses are recognized in the income statement, but gains are recognized in owners' equity.
Q:
For U.S. companies, foreign-currency-denominated receivables and payables give rise to exchange gains and losses ________.
A) at the end of each accounting period
B) only when the dollar strengthens against the foreign currency
C) only when the dollar weakens against the foreign currency
D) whether the transactions are denominated in dollars or the foreign currency
Q:
Which of the following is true concerning the International Accounting Standards Board?
A) The IASB is an EU institution designed to harmonize accounting standards among EU member countries.
B) The EU has voted to not adopt IFRS issued by the IASB so that it will not hurt its own convergence efforts.
C) The IASB and the FASB of the United States are working closely to harmonize accounting standards.
D) FASB has been ordered by the SEC to not work with the IASB in setting accounting standards.
Q:
The standard-setting organization tasked with the challenge of determining one set of accounting standards that can be used worldwide is the ________.
A) Global Financial Accounting Standards Board
B) International Organization of Securities Commissions
C) International Financial Reporting Committee
D) International Accounting Standards Board
Q:
The global integration of capital markets ________.
A) is a major force leading to the convergence of accounting standards
B) is a counterforce to regional political and economic harmonization
C) is being led by the strengthening of worldwide unions rather than investors
D) highlights the importance of maintaining differences in accounting worldwide
Q:
A major force leading to the convergence of accounting standards is ________.
A) a shareholder orientation towards FDI
B) the global separation of capital markets
C) MNEs' needs for foreign capital
D) pressures from the EU
Q:
According to the accounting concept of mutual recognition, ________.
A) companies are required to reconcile financial statements to local GAAP
B) a country would accept financial statements of foreign companies prepared according to the GAAP of the foreign country if a company wanted to list its shares on that country's stock exchange
C) companies would have to mutually agree to use GAAP issued by the IASB
D) companies would have to recast their financial statements in terms of local GAAP
Q:
GAAP usage differences increases the problems associated with ________.
A) trading foreign stock
B) establishing e-commerce
C) identifying emerging markets
D) raising capital in different countries
Q:
Garrison Industries, a global firm, provides financial information in its annual reports in more than one currency. Garrison Industries is most likely ________.
A) trying to provide information to users from different countries
B) providing footnotes to clarify its accounting practices
C) implementing global reporting requirements
D) altering its losses to show gains
Q:
Financial statements typically include ________.
A) accompanying footnotes, a balance sheet, and a cash-flow statement
B) translations into the languages of every country where the company lists shares
C) different currency results to reflect the different countries where the company has investments or generates revenues
D) different reports detailing the differences in generally accepted accounting principles used by the company in different countries
Q:
From the perspective of the classification of accounting systems, German and Japanese companies tend to be ________.
A) micro-based countries
B) strong equity market countries
C) weak equity market countries
D) pragmatic business countries
Q:
From an accounting perspective, countries with strong equity markets and shareholder orientations tend to be ________.
A) macro-uniform systems
B) micro-based systems
C) law-based systems
D) tax-based systems
Q:
Which accounting systems are shaped more by government practice?
A) macro-uniform accounting systems
B) micro-based systems
C) pragmatic business practice systems
D) business economic theory systems
Q:
Germany's accounting system has historically been a ________ system.
A) micro-pragmatic
B) macro-pragmatic
C) law-based
D) tax-based
Q:
The accounting principle that relates to more, rather than less, extensive footnotes in reports is known as ________.
A) secrecy
B) measurement
C) conservatism
D) transparency
Q:
German companies like Deutsche Bank and Daimler Chrysler have been relatively optimistic and transparent in their financial reporting compared with many Germanic companies because ________.
A) German accounting standards have always been optimistic and transparent
B) they adopted U.S. Generally Accepted Accounting Standards
C) they do not have to adopt International Accounting Standards
D) most of their revenues are from the United States and United Kingdom
Q:
In which quadrant of a disclosure/assessment matrix for accounting systems would you most likely find less-developed Latin countries?
A) conservatism and secrecy
B) transparency and conservatism
C) secrecy and transparency
D) optimism and secrecy
Q:
Which of the following statements is most likely true about secrecy and transparency in accounting?
A) Japanese firms are usually as transparent as U.S. firms.
B) German companies tend to be less transparent than British companies.
C) Secrecy and transparency refer to the degree of caution companies display in valuing assets.
D) Companies that list on stock exchanges are highly transparent because of stockholder audits.
Q:
Suzanne, an investor, tends to invest in corporations that are headquartered in countries that value financial transparency. A firm based in which of the following countries would most likely appeal to Suzanne?
A) Japan
B) Germany
C) Switzerland
D) United Kingdom
Q:
The accounting value that illustrates how companies are more liberal in their recognition of income is ________.
A) optimism
B) transparency
C) income-based accounting
D) measurement
Q:
How would you classify the accounting values of companies from the United States and the United Kingdom in terms of their measurement and disclosure of financial information?
A) secret and transparent
B) transparent and optimistic
C) secret and conservative
D) conservative and optimistic
Q:
The degree of caution companies display in valuing assets and recognizing income is known as ________.
A) conservatism
B) transparency
C) measurement
D) disclosure
Q:
Which term refers to how companies value assets such as inventory?
A) measurement
B) conservatism
C) disclosure
D) optimism
Q:
The accounting value that relates to issues such as how to present financial information and discuss financial results is known as ________.
A) measurement
B) conservatism
C) disclosure
D) optimism
Q:
International accounting firms, such as Deloitte and KPMG, have the most influence on ________.
A) international and domestic tax laws
B) public record disclosure rules
C) global auditing practices
D) domestic legal systems
Q:
Larson Shoes is a British company. Which balance sheet format is most likely used by Larson?
A) assets + liabilities = shareholders' equity
B) liabilities + shareholders' equity = assets
C) noncurrent assets + current assets - current liabilities - noncurrent liabilities = shareholders' equity
D) noncurrent assets - net current assets = liabilities + capital and reserves
Q:
The financial reports and information provided by businesses is primarily used by all of the following EXCEPT ________.
A) educators
B) investors
C) creditors
D) lenders
Q:
Hoffman Electronics is a U.S. company. Which balance sheet format is most likely used by Hoffman?
A) assets + liabilities = reserves
B) assets = liabilities + shareholders' equity
C) noncurrent assets + current assets - current liabilities - noncurrent liabilities = shareholder's equity
D) current assets - current liabilities = fixed assets - noncurrent liabilities = capital and reserves
Q:
At Cooper Industries, Jake is responsible for evaluating potential acquisitions abroad, managing cash flow, tax planning, and internal auditing. Which of the following is most likely Jake's position at Cooper?
A) CEO
B) treasurer
C) regulator
D) controller
Q:
In addition to hiding losses, Parmalat engaged in financial statement fraud to ________.
A) pay shareholders
B) bribe government officials
C) support family-owned businesses
D) avoid paying high export/import tariffs
Q:
A major reason for the Parmalat accounting scandal is that the firm ________.
A) sold milk in countries without a license
B) used U.S. GAAP standards instead of IFRS
C) used off-balance-sheet financing to hide debts
D) transferred most of its assets to banks in Switzerland
Q:
In regards to accounting, what is the impact of the SEC and Sarbanes-Oxley Act on international business?
Q:
What are the four main ways that financial statements differ from country to country? What role has the IASB played in establishing global accounting standards?
Q:
In a brief essay, discuss the concepts of transfer pricing and hedging.
Learning Outcome: Describe the role of accounting standards in international business
Q:
What metrics are used to measure the performance of an MNE? How is the balanced scorecard approach unique?
Q:
How do exchange rates affect budgets used to evaluate performance in MNEs?
Q:
Compare the two major approaches used to translate foreign currency financial statements, and explain how translation gains and losses are reported under these two approaches.
Q:
Explain the difference between macro-uniform-based and micro-based accounting systems. What are some examples of countries that fit in each system?
Q:
How do cultural values such as optimism, conservatism, transparency, and secrecy affect country differences in accounting systems?
Q:
What factors influence international accounting practices? What forces are leading to the global convergence of accounting practices?
Q:
What is the role of the controller in an MNE? What are some of the challenges that a controller faces in an international environment?
Q:
Differences in culture, geography, and financial methods make it complicated for MNEs to identify cause-and-effect performance measures.
Q:
The balanced scorecard approach is a preferred method for measuring performance among U.S. firms, but the EU does not allow its usage.
Q:
Ericsson, the Swedish MNE, was required as of 2005 to adopt both Swedish and U.S. GAAP since it lists it securities in both the U.S. and Sweden.
Q:
Parmalat engaged in financial statement fraud in part to divert funds to family-owned businesses.
Q:
U.S.-based MNEs do not like to use the balanced scorecard for evaluation performance because it does not take into consideration international differences.
Q:
The balanced scorecard is an approach to performance measurement that closely links the strategic and financial perspectives of a business.
Q:
A condition that is conducive to low transfer prices from the parent company to the subsidiary and high transfer prices from the subsidiary to the parent company is where the corporate income tax is lower in the subsidiary's country than in the parent country.
Q:
The challenge with setting an optimal transfer price is that there could be conflicting conditions in the local country.
Q:
British MNEs are more likely to use the forecast exchange rate to set the budget.
Q:
When using a budget for foreign operations, it is important for the parent company to select an exchange rate to set the budget and use that same rate to evaluate performance.
Q:
U.S.-based MNEs are not permitted to set budgets and monitor results using the same exchange rate.
Q:
Japanese companies are more likely to use sales as a measure of performance evaluation of foreign operations than income-based measures.
Q:
When using the current-rate method to translate foreign currency financial statements into the parent currency, translation gains and losses are recognized in comprehensive income.
Q:
The Financial Accounting Standards Board and International Accounting Standards Board allow firms to use the current-rate method or the temporal method to translate foreign currency financial statements into the currency of the parent company.
Q:
Consolidation of financial statements is the process of restating foreign subsidiary financial statements into the GAAP of the parent company.
Q:
Why are the concepts of dependability and quality important when developing a global manufacturing strategy?
Q:
What has been the influence of Japan on supply chain management? In your answer, discuss the concepts of industrial clustering and quality.
Q:
What factors complicate the international transportation of goods? How can a firm make the process more efficient?
Q:
What are foreign trade zones? How are they used?
Q:
What is a just-in-time inventory system? What are the implications of JIT for firms that use global sourcing?
Q:
What are the advantages and disadvantages of global and domestic sourcing? What role does quality play in deciding between global and domestic sourcing?
Q:
Describe total quality management.
Q:
How has technology altered supply chain management? Discuss some of the available tools.
Q:
What are the roles of compatibility, configuration, coordination, and control in a global manufacturing strategy? Describe each of these four factors.
Q:
What is a supply chain? How does a supply chain differ from materials management and logistics?
Q:
Warehouse configuration is a particularly important consideration in the establishment of a transportation network.
Q:
Fewer and fewer companies are using third-party intermediaries to store and transport goods.
Q:
Duty-free zones are special locations for storing domestic and imported inventory in order to avoid paying duties until the inventory is sold.
Q:
Foreign trade zones (FTZs) can be either general-purpose zones or subzones.
Q:
JIT is the process of sourcing raw materials and parts just as they are needed in the manufacturing process.
Q:
The use of JIT does not depend on the quality of incoming parts or the time of their arrival.