1. Code law (civil law) is associated with all of the following except

A. detailed statutes which establish a comprehensive system of law.

B. commercial codes which establish rules for accounting and financial reporting.

C. extensive use of professional judgment.

D. Western European countries such as France and Italy.

2. Countries with common law systems are more likely to have

A. accounting and financial reporting rules developed by professional bodies.

B. accounting and financial reporting rules which are statutory and the same as the country's tax accounting rules.

C. weak professional accounting and auditing organizations.

D. limited need for professional judgment in applying accounting standards.

3. In countries in which there are many family businesses and banks provide much of the financing, accounting and financial disclosure practices tended to be

A. conservative accounting practices with extensive disclosure.

B. oriented towards external financial statement users.

C. concerned with unbiased estimates of future performance.

D. conservative accounting practices with limited disclosure.

4. A country in which there are many family businesses that have traditionally relied on bank financing is

A. France.

B. USA.

C. UK.

D. All of the above are true.

5. Solvency ratios include all of the following except

A. Times-interest-earned.

B. Debt-to-total assets

C. Current ratio.

D. All of these are solvency ratios.

6. Times-interest-earned is a measure of

A. marketability.

B. profitability.

C. liquidity.

D. solvency.

7. Hofstede's cultural dimension of power distance refers to

A. the extent to which individuals accept societal hierarchy and their place in it.

B. a preference for a tightly-knit social fabric.

C. the extent to which a society focuses on the individual rather than the community.

D. the extent to which individuals are comfortable with uncertainty and ambiguity.

8. All of the following are accounting values suggested by Gray in his extension of Hofstede's cultural dimension to the development of accounting practices except

A. professionalism.

B. uniformity.

C. secrecy.

D. power.

9. Which difference in accounting practices would impact the comparability of the current ratio between a company using US GAAP and a company using IFRS?

A. US company uses LIFO.

B. IFRS company revalues assets.

C. IFRS company records recovery of impairment.

D. All of these differences in accounting practices would impact the comparability of the two companies' current ratios.

10. All of the following statements are true regarding differences between US GAAP and IFRSexcept

A. IFRS requires component depreciation while US GAAP allows it.

B. IFRS requires recovery of impairment on long-term assets while US GAAP does not allow it.

C. IFRS allows revaluation of long-term assets but US GAAP does not allow it.

D. US GAAP requires the use of LIFO while IFRS does not allow it.

11. Which of the following is not trueof IFRS?

A. IFRS capitalizes development expenditures once technological feasibility has been achieved.

B. IFRS allows for recovery of impairment up to the book value of the asset before the impairment was recorded.

C. The revaluation surplus recorded when assets are revalued is included in net income.

D. All of the above are true of IFRS.

12. All of the following are factors which influence the development of financial reporting practices except

A. type of currency.

B. colonialism.

C. culture.

D. inflation.

13. Liquidity ratios measure

A. The ability of the company to pay its long-term debt and to survive in the long run.

B. How well a company uses its invested capital.

C. How well a company utilizes its assets to generate a profit.

D. The ability of a company to pays its short-term obligations as they mature.

14. Which of the following comparisons between IFRS and U.S. GAAP is true?

A. U.S. GAAP is far more detailed than IFRS.

B. IFRS is more rules-based which U.S. GAAP is more principles-based.

C. U.S. GAAP is less conservative than IFRS.

D. IFRS requires more extensive disclosure than U.S. GAAP.

15. Which of the following is true regarding companies who wish to trade on the New York Stock Exchange and are, therefore, regulated by the U.S. Securities Exchange Commission?

A. All domestic and foreign companies must use U.S.GAAP.

B. Domestic companies must use U.S. GAAP but foreign companies can use IFRS as long as they provide a reconciliation to U.S. GAAP.

C. Domestic and foreign companies can use either IFRS or U.S. GAAP.

D. Domestic companies must use U.S. GAAP but foreign companies can use IFRS.

16. Turnover ratios reflect

A. the profitability of the company's investments in long-term assets.

B. the number of times assets flow into and out of the company during the period.

C. the operating cash inflows and outflows of the company.

D. the ability of the company to pay its current liabilities.

17. The concept of prudence is included in

A. the IASB Conceptual Framework.

B. the FASB Conceptual Framework.

C. the EU 4^th Directive.

D. the Qualitative Characteristics of Useful Information.

18. In the EU, IFRS

A. automatically becomes law when issued by the IASB.

B. must be adopted individually by the European Commission and may be amended in the process.

C. must be endorsed by each member state.

D. are considered general guidelines and do not have the force of law.

19. Why did the FASB and the IASB undertake a joint project to revise their conceptual frameworks?

A. If new rules and revisions to existing rules are based on the same objective and concepts, then similar rules should result, enhancing convergence of U.S. GAAP and IFRS.

B. The joint initiative was intended to reduce the work for each of the two standard-setting organizations.

C. The joint project was intended to be the first of a three-phase project that would produce a single set of globally accepted financial reporting standards.

D. The IASB hoped that it would encourage the US securities regulator, the SEC, to accept IFRS for use by domestic companies.

20. In IFRS, the term reserves can be used to describe

A. undistributed profits set aside for the protection of creditors.

B. an allowance for uncollectible accounts.

C. a provision for depreciation expense.

D. a contingent liability.

21. Under IFRS, a provision is

A. a probable liability of uncertain timing or amount.

B. a possible liability.

C. a liability that cannot be quantified.

D. a gain contingency.

22. An example in which the IFRS accounting treatment is more conservative than the U.S. GAAP accounting treatment concerns

A. research and development expenditures.

B. recovery of impairment.

C. accrual of gain contingencies.

D. None of these are IFRS accounting treatments which reflect more conservative practice the U.S. GAAP.

23. Which of the following would be a US GAAP Level 1 fair value estimate for an asset?

A. A discounted cash flow analysis

B. A direct quote from an active market.

C. A direct quote from an inactive market.

D. A direct quote from an active market for a similar but not identical asset.

24. Which of the following statements about the historical cost principle is not true?

A. Historical cost was traditionally the dominant measurement principle for U.S. GAAP.

B. The historical cost principle states that assets should be recorded at acquisition cost and subsequently revalued to fair value if a Level 1 fair value estimate is available.

C. Historical cost is neither verifiable and objective.

D. Historical cost may be less relevant than fair value.

25. Which of the following valuations is not correct under U.S. GAAP?

A. Trademark at historical cost.

B. Land at historical cost.

C. Investments in Trading Securities at fair value.

D. Building at fair value.

26. Which of the following statements is not correct regarding the revaluation of assets under IFRS?

A. If revaluation is elected, all property, plant, and equipment must be revalued annually.

B. Upward revaluation results in increased depreciation expense.

C. Unrealized gains and losses from revaluation are reported as Revaluation Surplus in Other Comprehensive Income.

D. If revaluation is elected, it must be consistently applied as long as the company owns the asset.

27. U.S.companies often choose to use the LIFO cost flow assumption because they will generally

A. pay higher income taxes.

B. report a higher ending inventory valuation.

C. report higher profits.

D. Report lower net income and pay lower taxes.

28. Liquidity ratios measure

A. the company's ability to generate cash flows.

B. the efficiency with which the company uses its assets.

C. the company's ability to pay its current liabilities.

D. how much income could decline and still allow the company to make interest payments on its debt.

29. In international financial statement analysis, attention should be given to all of the following potential differences in accounting practices except:

A. Impairment of assets.

B. Recovery of impairment of assets.

C. Revaluation of assets.

D. Inventory cost flow assumptions.

30. Which of the following ratios would be affected if a company using IFRS chooses to revalue its assets?

A. Current ratio

B. Working capital

C. Return on assets

D. All of these ratios would be affected.

31. All of the following are problems caused by accounting diversity except

A. enhanced efficiency in global capital markets.

B. lack of comparability of financial statements.

C. lack of access to global capital markets.

D. lack of high-quality accounting information and disclosure.

32.	According to the Conceptual Framework, what is the objective of financial reporting?
	A.	Provide information that excludes claims to the resources.
	B.	Provide information that clearly portrays nonfinancial transactions.
	C.	Provide information that is useful to management in making decisions.
	D.	Provide information about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors.

33.	Revenue is recognized in the accounting period in which the performance obligation is satisfied. This statement describes the
	A.	revenue recognition principle.
	B.	relevance characteristic.
	C.	comparability characteristic.
	D.	expense recognition principle.