(L.O. 7) A Brazilian corporation listed on a U.S. exchange

a. is permitted to use iGAAP.

b. must follow the accounting standards set forth by the government of Brazil.

c. must use U.S. GAAP.

Explanation: Presently, there are two sets of standards accepted for international use—GAAP (U.S.

standards) and the International Financial Reporting Standards (IFRS). IFRS are issued by the Londonbased International Accounting Standards Board (IASB). U.S. companies that list overseas are still permitted to use GAAP, and foreign companies listed on U.S. exchanges are permitted to use IFRS There are many similarities between GAAP and IFRS. Already over 115 countries use IFRS, and the European Union now requires all listed companies in Europe (over 7,000 companies) to use them. It is now highly probable that the United States will adopt IFRS in the near future because the FASB recognizes the need for one set of high-quality global accounting standards. To achieve this goal, the FASB and the IASB are now working hard to find common ground related to existing and proposed standards. Both parties recognize the global markets will best be served if only one set of standards is used. For example, the FASB and the IASB formalized their commitment to the convergence of GAAP and IFRS by issuing a memorandum of understanding (often referred to as the Norwalk agreement).

(Solution = a).