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WorksheetsFinal Quiz
Total questions: 43
Worksheet time: 22mins
IAS 32 defines a financial instrument as:
the currency of a foreign country in which the enterprise does business.
a certified check.
a recognized stock exchange.
any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
What is a "strike price?"
The exchange rate that is used to buy a foreign currency today
The price that will be paid for goods in a forward contract
The difference between the wholesale rate and the retail rate for foreign currency exchange
The exchange rate that will be used if a foreign currency option is executed
Which of the following items should be shown as a component of comprehensive income?
.Dividend paid to a shareholder.
Foreign-currency translation adjustment.
Additional capital contribution.
Deferred revenue
A net liability balance sheet exposure exists and the foreign currency depreciates. Which of the following statements is generally true?
There is no translation adjustment.
There is a positive translation adjustment.
There is a negative translation adjustment.
There is a remeasurement loss.
There is a remeasurement gain.
A company from the United Kingdom uses British pounds in its normal operations, reports in the European Union in euros, and reports in the United States in U.S. dollars. The company is owned by a private equity firm in Japan. What is the company's functional currency?
The Euro
The British pound.
The U.S. dollar.
The Japanese yen.
Why is investing in foreign companies an effective way to diversify an individual's investment portfolio?
Foreign economies are stronger than the Vietnamese economy.
Foreign stocks are less risky than the stocks of Vietnamese corporations.
Stock returns of companies in foreign companies are highly correlated with stock returns of Vietnamese companies.
Returns on foreign company stocks do not always change in the same direction as returns on Vietnamese stocks
What is the best short - term solution to alleviate problems of financial statement analysis arising from international differences in accounting terminology?
Require all countries to conform to IASB standards.
Create standard financial statement terminology for all companies around the world
Convert all financial statements into English.
Analysts should carefully read the notes to financial statements and learn about the business environments of countries they analyze.
Which of the following is true about financial statement disclosure?
When account balances are aggregated, the analyst has the greatest amount of information.
The concept of full disclosure has been universally adopted around the world.
An analyst can always disaggregate financial statement disclosures to obtain needed information.
The amount and types of financial statement disclosure vary widely from one country to another
Compared to balance sheet information, income statement information has been relatively more important and informative in
France
Mexico
Japan
Germany
Which is NOT one of the basic steps in financial statement analysis?
Prospective analysis
Accounting analysis
Financial analysis
Translation analysis
How is preferred stock reported for IFRS when it is redeemable at the option of the shareholders?
As equity
As mezzanine equity
As temporary equity
As a liability
None of the above
Which of the following represents a difference in the classification of current liabilities between IFRS and U.S. GAAP?
Refinanced short-term debt
Amounts payable on demand due to violation of debt covenants
Bank overdrafts
All of the above
Which of the following is the characteristic of a perfect hedge?
No possibility of future gain or loss.
No possibility of future gain only.
No possibility of future loss only.
The possibility of future gain and no future loss.
Under U.S. GAAP, a deferred tax asset must be realized when:
realization is probable.
realization is possible.
realization is greater than 75% likely.
realization is more likely than not.
Under IFRS 2, Share-based Payment, what approach is used to account for the transaction?
Comparable transaction approach
Market approach
Notional value approach
Fair value approach
Under IAS 12, current and deferred taxes are measured on the basis of:
rates prevailing when the entity provided goods or services.
current rates and rates anticipated when temporary differences reverse.
rates anticipated when temporary differences reverse.
rates that have been enacted or substantively enacted by the balance sheet date.
Triple bottom line (TBL) reporting is prepared on the basis of the following three bottom limes EXCEPT:
Economic bottom line
Environmental bottom line
Social bottom line
Accounting bottom line
A foreign subsidiary of a U.S. parent company should measure its assets, liabilities and operations using
The subsidiary's local currency
The subsidiary's functional currency
The U.S. dollar
The best available spot rate
Which of the following describes defined benefit pension plans?
The investment risk is borne by the employee.
The plans are simple and easy to construct.
Retirement benefits depend on the individual's account balance.
The investment risk is borne by the employer.
Which of the following financial instruments may be considered a derivative financial instrument?
Option contract
Municipal bond
Bank certificate of deposit
Money market fund
How does IFRS require the past (or prior) service cost related to retirees to be recognized?
Don't recognize at all
Amortize over the average remaining working lives of active employees
Amortize over remaining expected life of the retirees
Recognize immediately
A company's foreign subsidiary operation maintains its financial statements in the local currency. The foreign operation's capital accounts would be translated to the functional currency of the reporting entity using which of the following rates?
Historical exchange rate
Functional exchange rate
Weighted-average exchange rate
Current exchange rate at the balance sheet date
How does U.S. GAAP differ from IFRS with respect to cash-settled share-based payments?
U.S. GAAP always treats such payments as a liability.
U.S. GAAP offers the option to treat such payments as either a liability or equity.
IFRS and U.S. GAAP follow the same approach with respect to such payments.
U.S. GAAP, under certain circumstances, may treat such payments as equity.
Which of the following is a difference between IAS 37 and U.S. GAAP with respect to restructuring provisions?
A restructuring provision and related loss is more likely to occur later under IAS 37 than under U.S. GAAP.
There is no difference between IAS 37 and U.S. GAAP with respect to restructuring provisions.
IAS 37 does not allow recognition of a restructuring provision until a liability has been incurred.
U.S. GAAP does not allow recognition of a restructuring provision until a liability has been incurred.
On what SEC form must foreign corporations with shares listed on U.S. stock exchanges present a reconciliation of net income and stockholders' equity to U.S. GAAP?
Form 10-Q
Form 10-K
Form 8-Q
Form 20-F
Under IAS 37, inflows of resources that are 'virtually certain' to be received should be:
disclosed as contingent assets in the notes to the financial statements.
undisclosed until management is absolutely certain that resources will be received.
reported only in the cash flow statement.
recognized as assets.
Under IAS 12, Income Taxes, which of the following issues are covered?
Temporary differences
Operating loss carry forwards
Tax credit carry forwards
All of the above
According to IAS 37, how should contingent assets be recognized?
They should be recognized like any other asset, with a debit to 'contingent assets.'
They should not be disclosed anywhere in the financial statements due to their uncertainty.
They should only be disclosed in the notes to the financial statements if the inflows of resources are virtually certain.
They should be disclosed in the notes to the financial statements if the inflow of resources is probable.
The corporate social reporting (CSR) theory that environmental disclosures are made in response to a demand for environmental and social information is called the:
legitimacy theory
superfund theory
depletable resource theory
stakeholder theory
Under IFRS 15, which of the following is NOT a condition that must be met in order for revenue from the sale of goods to be recognized?
The significant risks and rewards of ownership of the goods have been transferred to the buyer.
The amount of revenue can be measured reliably.
Neither continued managerial involvement normally associated with ownership nor effective control of the goods is retained.
There must be a binding, written contract between the seller and the buyer.
Under IFRS standard, on which of the following dates is a public entity required to measure the cost of employee services in exchange for an award of equity interests, based on the fair market value of the award?
Date of vesting
Date of restriction lapse
Date of exercise
Date of grant
What kinds of temporary differences related to income taxes can arise under IFRS that don't occur under U.S. GAAP?
Book and tax differences related to the amortization of property, plant, and equipment for book purposes and cost method for tax purposes.
Book and tax differences related to the calculation of impairments for book purposes with adjustment for tax purposes.
Book and tax differences related to the calculation of contingent liability for book purposes with no like adjustment for tax purposes.
Book and tax differences related to the revaluation of property, plant, and equipment for book purposes and cost method for tax purposes.
Under IAS 39, Financial Instruments: Recognition and Measurement, which of the following is NOT a category into which a financial asset must be classified?
Held-to-maturity investments
Loans and receivables
Available-for-sale financial assets
Property, plant, and equipment
The FASB requires that compensation expense be measured using one of several option pricing models that deal with the following factors. Which of the following factors has inverse relation with the fair value of stock option?
Expected term of the option.
Current market price of the stock.
Expected risk-free rate of return.
Expected volatility of the stock.
Exercise price of the option.
The term 'provision' as it is used in IAS 37, is most closely related to what term in U.S. GAAP?
Current liability, where the outflow is difficult to measure.
Reserve for bad debt, where the amount recoverable is 'uncertain.'
Contingent liability, where the outflow of resources is 'remote.'
Contingent liability, where the outflow of resources is 'probable.'
Under IFRS 15, which of the following is an example of retention of significant risks and rewards by the seller?
The buyer has no right to rescind the purchase.
The seller is under no obligation for satisfactory performance not covered by normal warranties.
Goods are sold subject to installation, but installation is not a significant part of the contract and has not yet been completed.
Receipt of revenue by the seller is contingent on the buyer generating revenue through its sale of the goods.
Under IAS 1, Presentation of Financial Statements, how must deferred taxes be classified on the balance sheet?
As either a current asset or a current liability
As either a current or noncurrent asset or liability based on the expected timing of realization
As a separately stated positive or negative component of equity
As always a noncurrent asset or a noncurrent liability
A foreign subsidiary's functional currency is its local currency, which has not experienced significant inflation. The weighted average exchange rate for the current year would be the appropriate exchange rate for translating
Salaries expense: Yes
Sales to external customers: Yes
Salaries expense: Yes
Sales to external customers: No
Salaries expense: No
Sales to external customers: Yes
Salaries expense: No
Sales to external customers: No
IFRS defines functional currency as:
the currency of the parent company.
the currency of the primary economic environment in which the subsidiary
operates.
the currency of the primary economic environment in which the parent
operates.
the currency used by a subsidiary for its financial reporting
Which of the following methods for translating foreign currency financial statements attempts to produce consolidated financial statements as if a foreign subsidiary had actually used the parent company's currency for all its transactions?
Current/Noncurrent method
Monetary/Nonmonetary method
Current rate method
Temporal method
What is the primary difference between a cash flow hedge and a fair value
hedge?
The fair value hedge must completely offset the variability in the cash flow
from the foreign currency receivable or payable.
The cash flow hedge must completely offset the variability in cash flow from
the foreign currency receivable or payable.
The cash flow hedge can only be used to offset potential foreign currency
losses on accounts receivable.
The fair value hedge can only be used to offset the variability in cash flow
from long-term
fixed assets related to foreign currency fluctuations.
Car Corp. (a U.S.-based company) sold parts to a Japanese customer on
December 1, 2020, with payment of 10 million Japanese yen to be received on
January 31, 2021. The following exchange rates applied:
Assuming a forward contract was entered into, what would be the net impact on
Car Corp.'s 2020 income statement related to this foreign currency transaction?
Assume an annual interest rate of 12% and a fair value hedge. The present value
for one month at 12% is .9901.
$ 295.05 (loss).
$ 300 (gain)
$ 300 (loss)
$ 700 (gain)
$ 700 (loss).
All of the following data may be needed to determine the fair value of a
forward contract at any point in time except
A discount rate
The forward rate when the forward contract was entered into.
The current forward rate for a contract that matures on the same date as the
forward contract entered into.
The future spot rate.
All of the above data needed determine the fair value of a forward contract
