This is from the book: International Accounting A user perspective 3rd Edition

International Accounting A User Perspective CHAPTER 2QUESTIONS TRUE/FALSE 1. Accounting harmonization, according to its critics, is a form of accounting colonialism. 2. The Multijurisdictional Disclosure System negotiated between the SEC in the United States and Canadian regulators has proven the viability of the bilateral approach to harmonization. 3. Both US GAAP and IFRS require improvements in a number of important areas. 4. The FASB favors the creation of a US variant to IFRS by adjusting IFRS to fit with existing US GAAP. 5. The FASB advocates creating a long term period during which US companies may choose between US GAAP and IFRS. 6. Developing countries disfavor harmonization because they prefer to devote their resources to developing an indigenous accounting standard. 7. Many stock exchanges look to foreign companies for growth in listings, but do not favor harmonization because it may disrupt the already dramatic increase in cross-border listings. 8. The absence of strong professional accounting bodies in many countries is considered an obstacle to harmonization efforts .TRUE 9. The United Nations is among the list of supra-national organizations involved in accounting harmonization. 10. In transitioning from US GAAP to IFRS, the FASB has identified the litigious nature of the US as an area of critical concern. MULTIPLE CHOICE 1. The term accounting \"harmonization\" refers to the reduction of differences in financial reporting practices among countries, while accounting \"convergence\": a. refers to moving toward a single set of global standards b. means moving to two sets of standards, one for developed and another for developing nations c. has same definition as \"harmonization\" d. none of the above International Accounting A User Perspective 2. Pressures to harmonize are driven by: a. feelings of nationalism b. investors concerned about the reliability of financial statements from foreign countries c. debate about rules-based versus principles-based accounting standards d. b. and c. 3. Obstacles to harmonization are driven by: a. feelings of nationalism b. investors concerned about the reliability of financial statements from foreign countries c. debate about rules-based versus principles-based accounting standards d. b. and c. 4. The organization that has emerged as the main vehicle for global accounting harmonization is: a. the PCAOB b. the FASB c. the IASB d. the IOSCO 5. The transitioning from US GAAP to IFRS in the United States is being done through a two-pronged approach referred to as: a. improve and converge b. improve and adjust c. improve and harmonize d. none of the above 6. A regional organization of countries that from the outset adopted a global paradigm for harmonization is: a. the EU b. NAFTA c. the ASEAN d. none of the above 7. A regional organization of countries that initially attempted to implement a regional paradigm of harmonization is: a. the EU b. NAFTA c. the ASEAN d. none of the above International Accounting A User Perspective 8. Accounting systems in ASEAN countries are: a. homogeneous b. far from being homogeneous c. disconnected from their colonial histories d. a. and c. 9. Pressures for accounting harmonization come from: a. multinational companies and regulators b. strong desire among many for rules-based standards c. securities industry and stock exchanges d. a. and c. 10. According to its proponents, advantages to principles-based accounting standards are: a. more likely to reflect economic substance of a transaction b. facilitates a straight-forward check-the-box approach to accounting c. encourages a \"show me where I can't do this\" approach d. all of the above CHAPTER 3QUESTIONS TRUE/FALSE 1. Foreign exchange exposure is a measure of the potential for a firm's profitability, cash flow and market value to change due to a change in exchange rates. TRUE 2. Quotation exposure, backlog exposure and billing exposure are all measurable and consequently, all are accounted for in financial reporting. 3. The results obtained under the monetaryon-monetary method and the temporal method are similar and both accommodate current market valuation of non-monetary assets. FALSE 4. Under SFAS No. 52, the functional currency determines the translation method to be used. Thus, companies can effectively select the translation method they use by their choice of functional currency. TRUE 5. Currency conversion is the process of restating numbers in a financial statement by applying an appropriate exchange rate. FALSE 6. The six variables in the FASB's criteria to determine functional currency are rather judgmental and lack any specific quantitative measures with the result that management has considerable latitude to choose whatever translation method it prefers via the choice of functional currency. TRUE International Accounting A User Perspective 7. SFAS No. 52 contains an exception for hyperinflationary situations, which replaces the current rate method with the temporal method when the local currency is the functional currency. FALSE 8. International Accounting Standard No. 21 differs from SFAS 52 in its treatment of highly inflationary economies by using a translate/restate approach rather than SFAS 52's restate/translate approach. 9. When the local currency is the functional currency, SFAS No. 52 requires the use of the current exchange rate to translate all balance sheet items, including goodwill. IAS No. 21 allows the use of either the current exchange rate or the historical exchange rate. TRUE 10. SFAS No. 161, Disclosures About Derivative Instruments and Hedging Activities, supersedes and replaces SFAS No. 131, Accounting for Derivatives and Hedging Activities. MULTIPLE CHOICE 1. The difference between the spot rate and the forward rate is called a premium when: a. when the forward rate is less expensive that the spot rate b. when the forward rate is more expensive than the spot rate c. when the forward rate is discounted d. when the forward rate equals the spot rate 2. The almost immediate purchase or sale of foreign currency involves: a. the forward market b. the spot market c. the foreign exchange market d. a foreign exchange transaction 3. The right to trade a foreign currency at a set exchange rate on or before a given date in the future is called: a. a currency option b. a currency contract c. a currency swap d. a trade agreement 4. Translation exposure, one of the three types of foreign exchange exposure: a. arises when foreign currency financial statements of foreign affiliates must be restated into the parent's currency International Accounting A User Perspective b. relates to the sensitivity of the firm's contractual cash flows denominated in foreign currency to exchange rate changes as measured in the firm's domestic currency c. relates to the extent to which the value of the firm would be affected by unexpected changes in currency exchange rates d. none of the above 5. Economic exposure, one of the three types of foreign exchange exposure: a. arises when foreign currency financial statements of foreign affiliates must be restated into the parent's currency b. relates to the sensitivity of the firm's contractual cash flows denominated in foreign currency to exchange rate changes as measured in the firm's domestic currency c. relates to the extent to which the value of the firm would be affected by unexpected changes in currency exchange rates d. none of the above 6. Transaction exposure, one of the three types of foreign exchange exposure: a. arises when foreign currency financial statements of foreign affiliates must be restated into the parent's currency b. relates to the sensitivity of the firm's contractual cash flows denominated in foreign currency to exchange rate changes as measured in the firm's domestic currency c. relates to the extent to which the value of the firm would be affected by unexpected changes in currency exchange rates d. all of the above 7. The only permissible translation method according to the FASB under SFAS No. 8 (1975) is: a. currenton-current method b. current rate method c. monetaryon-monetary method d. temporal method 8. When the U.S. dollar is deemed to be the functional currency of the foreign subsidiary a. its financial statements are converted to US dollars using the temporal method b. its financial statements are converted to US dollars using the current rate method c. translation under SFAS No. 52 is essentially the same as in SFAS No. 8 d. a. and c. International Accounting A User Perspective 9. When the local currency is determined to be the foreign subsidiary's functional currency a. its financial statements are converted to US dollars using the temporal method b. its financial statements are converted to US dollars using the current rate method c. translation under SFAS No. 52 is essentially the same as in SFAS No. 8 d. a. and c. 10. When the functional currency is neither the U.S. dollar nor the local currency of the country where the subsidiary is located, but rather the currency of a third country PAGE 3-84 a. the third country's financial statements are converted to U.S. dollars using the temporal method b. the third country's financial statements are converted to U.S. dollars using the current rate method c. the subsidiary's financial statements are converted from the local currency to the functional currency using the temporal method and then translated from the functional currency to the U.S. dollar using the current rate method d. none of the above