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Test Bank for international accounting 6th Edition by Timothy Doupnik
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Test Bank for international accounting 6th Edition by Timothy Doupnik
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Test Bank for international accounting 6thEdition by Timothy Doupnik
foreign exchange risk - ANSas the value of the foreign currency
is likely to change in relation to the
company's home country currency
made a sale but exchange rates changed after the sale or during journal entries - ANSDr.
Accounts receivable 100,000
Cr. Sales revenue 100,000
Dr. Cash 90,909
Dr. Loss on foreign exchange 9,091
Cr. Accounts receivable 100,000
Hedging - ANSprotect itself against a loss from an exchange rate fluctuation
hedging can be done by - ANSForeign currency option
Forward contract
Foreign Direct Investment - ANSoccurs when a company invests in a business operation in a
foreign country. This represents an alternative to exporting to customers in a foreign country
Forward contract - ANSthis is an obligation to exchange foreign currency at a date in the future,
which is typically 30, 60 or 90 days.
Foreign currency option - ANSthe right (but not the obligation) to sell foreign currency at a
specific exchange rate for a specified period of time
Foreign Direct Investment two types - ANSgreenfield investment and (2) acquisition
who creates IFRS - ANSGlobal Accounting standards
Global Auditing standards
International capital markets - ANSAs of Dec. 31, 2017 there were 496 companies representing
46 countries cross-listed on the New York Stock Exchange (NYSE). In addition, over 50 U.S.
companies are cross-listed on the London Stock Exchange
IFRS accounting for research and development - ANSresearch expenditures to be expenses on
the income statement. However, some development expenditures may be capitalized as assets
on the balance sheet
, IFRS method for asset evaluation - ANSCost Model
Revaluation Model
Cross-Listing - ANSWhen a company offers its shares on an exchange outside of its home
country, this is referred to as
International Auditing
problems - ANSLanguage and cultural differences
Different accounting standards
Different auditing standards
Taxation - ANSgovernments in the various countries often examine carefully the inter-company
transactions to assure that sufficient profits are being recorded in that country
Transfer pricing - ANSsetting prices on goods and services exchanged between separate
divisions within the same company. These prices have a direct impact on the profits of the
different divisions.
U.S. income taxes - ANSthe U.S. government will tax the company's foreign-based income.
Foreign income taxes - ANSthe foreign government will tax the company's profits at applicable
rates.
FDI creates two new accounting issues - ANSForeign Currencies
Accounting Rules
Reasons for Foreign Direct Investment - ANSIncrease sales and profits
Enter rapidly growing or emerging markets
Reduce costs
Acquire technological and managerial know-how
Acquisition - ANSinvestment in an existing operation in the foreign country.
Greenfield investment - ANSthe establishment of a new operation in the foreign country.
inflation entries - ANSInventory
50
Holding Gain
50
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