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Test Bank for International Accounting Test #1 (6th Edition by Timothy Doupnik)
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Test Bank for International Accounting Test #1 (6th Edition by Timothy Doupnik)
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Test Bank for International AccountingTest #1 (6th Edition by Timothy Doupnik)
International Accounting can be described at three different levels... - ANS-The influence on
accounting by international political groups such as the OECD, UN, etc.
-The accounting practices of companies in response to their own international business
activities.
-The differences in accounting, auditing and taxation standards and practices between
countries.
Most companies' first encounter with international business occurs as
________________________________. - ANSsales to foreign customers
Often, the sale is made on credit and it is agreed that the foreign customer will pay in a different
currency. True or False? - ANSFalse. Often, the sale is made on credit and it is agreed that the
foreign customer will pay in its own currency.
When sales to foreign customers creates risk that the value of the foreign currency is likely to
change in relation to the company's home country currency. - ANSWhat is foreign exchange
risk?
the right (but not the obligation) to sell foreign currency at a specific exchange rate for a
specified period of time. - ANSForeign currency option
(i.e., protect itself) against a loss from an exchange rate fluctuation - ANSHedge
this is an obligation to exchange foreign currency at a date in the future, which is typically 30, 60
or 90 days. - ANSForward contract
occurs when a company invests in a business operation in a foreign country. This represents an
alternative to importing to customers and/or exporting from suppliers in a foreign country. -
ANSForeign Direct Investment (FDI)
Two types of foreign direct investment are _____________________________ - ANSgreenfield
investment and acquisition
the establishment of a new operation in the foreign country. - ANSGreenfield investment
investment in an existing operation in the foreign country. - ANSAcquisition
, What are the two primary issues that arise from foreign direct investment (FDI)? - ANS-The
need to convert from local to U.S. GAAP since accounting records are usually prepared using
local GAAP.
-The need to translate from local currency to U.S. dollars since accounting records are usually
prepared using local currency.
the foreign government will tax the company's profits at applicable rates. - ANSForeign income
taxes
the U.S. will tax the company's foreign-based income. - ANSU.S. income taxes
setting prices on goods and services exchanged between separate divisions within the same
firm. These prices have a direct impact on the profits of the different divisions. - ANSTransfer
pricing
governments in the various countries often scrutinize transactions to assure that sufficient profits
are being recorded in that country - ANSTaxation
to the extent that division managers are evaluated based on divisional profits, transfer prices
influence division manager performance evaluation. - ANSPerformance evaluation issues
differences that arise between auditing in an international vs. domestic context found by internal
and external auditors - ANS-Language and cultural differences
-Different accounting standards (GAAP) and auditing standards (GAAS)
MNCs frequently raise capital outside their home country. When a company offers its shares on
an exchange outside of its home country, this is referred to as
_______________________________. - ANSCross Listing
MNCs frequently raise capital outside their home country. When a company offers its shares on
an exchange outside of its home country, this is referred to as _____________________. -
ANS"International Financial Reporting Standards" or "IFRS".
Two advantages to the adoption of a global set of accounting standards - ANS-Countries
adopting these standards, will, for example, be in a better position to evaluate FDI
-Another advantage of the adoption of global accounting standards is the elimination of the need
to convert from local GAAP when preparing consolidated financial statements.
- In 2008 exports worldwide topped $16 trillion. Between 1996 and 2008, U.S. exports increased
by ______ in volume. - ANS106%
Between 1982 and 2008 worldwide FDI inflows increased from $58 billion to ___________. -
ANS$1.7 trillion
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