7. What is foreign exchange risk exposure?

A) the possibility of a loss because of changes in the value of a foreign currency

B) losses caused by paying for purchased goods in a foreign currency

C) losses caused by receiving payment in a foreign currency for goods sold

D) All of the above

1. Which of the following statements is true about U.S. taxation of foreign subsidiaries?

A) The U.S. does not tax income generated on subsidiaries incorporated in foreign countries.

B) U.S. tax on foreign operations does not have to be paid until the income is brought back to the United States.

C) U.S. multinationals pay tax on their worldwide income as soon as it is earned.

D) Transfer pricing will eliminate taxes by the U.S. government on multinational corporations.

2. According to IAS 37, how should contingent assets be recognized?

A) They should be disclosed in the notes to the financial statements if the inflow of resources is probable.

B) They should be recognized like any other asset, with a debit to contingent assets.

C) They should not be disclosed anywhere in the financial statements due to their uncertainty.

D) They should only be disclosed in the notes to the financial statements if the inflows of resources are virtually certain.

3. What would be a logical first step that should be taken to restate foreign financial statements to conform to U.S. GAAP, assuming a four-column worksheet will be used to post debit and credit adjustments and reclassifications to arrive at U.S. GAAP statements?

A) Convert the foreign currency amounts to U.S. dollars.

B) Re-order foreign financial statements to U.S. format.

C) Restate historical costs to current cost basis.