Chapter 11 Exam 3

20 Questions | Total Attempts: 96

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Chapter 11 Exam 3 - Quiz

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Questions and Answers
  • 1. 
    1.  In the United States, foreign companies filing annual reports with the SEC that are not prepared in accordance with U.S. GAAP must:
    • A. 

      A) Present financial statements that comply with international GAAP.

    • B. 

      B) Conform with U.S. GAAP or present a reconciliation to U.S. GAAP.

    • C. 

      C) Have a demonstrated need for capital to be used for operations in the U.S.

    • D. 

      D) Use the U.S. dollar as their reporting currency.

    • E. 

      E) Either use IFRS, or otherwise use foreign GAAP with a reconciliation to U.S. GAAP.

  • 2. 
    2.  Which of the following is not a likely step to furthering convergence of FASB and IFRS?
    • A. 

      A) FASB adopting an existing IASB Standard.

    • B. 

      B) IASB adopting an existing FASB standard.

    • C. 

      C) FASB and IASB issuing an identical standard.

    • D. 

      D) FASB working with IASB to develop a new standard.

    • E. 

      E) Realizing that identical standards, rather than similar standards, is not realistic.

  • 3. 
    3. All of the following are influences on the development of a country’s financial reporting practices except:
    • A. 

      A) The country’s legal system.

    • B. 

      B) The country’s political system.

    • C. 

      C) The taxation system.

    • D. 

      D) The country’s cultural system.

    • E. 

      E) The country’s level of inflation.

  • 4. 
    4.  Which of the following is a pronouncement originally issued by the IASC and is not a pronouncement originally issued by the IASB?
    • A. 

      A) Business Combinations.

    • B. 

      B) First-Time Adoption of IFRS.

    • C. 

      C) Financial Instruments: Disclosures.

    • D. 

      D) Interim Financial Reporting.

    • E. 

      E) Operating Segments.

  • 5. 
    5.  In countries of Latin America:
    • A. 

      A) Accounting practice currently emphasizes political colonialism.

    • B. 

      B) Accounting standards previously emphasized accounting highly inflationary economies.

    • C. 

      C) Banks are the primary source of financing for companies.

    • D. 

      D) Accounting standards focus are based on recent market economy reforms.

    • E. 

      E) Accounting information is prepared to meet the needs of governmental planners.

  • 6. 
    6.  Which of the following is not a way for a country to use IFRS?
    • A. 

      A) Require foreign companies listed on that country’s stock exchange to use IFRS for consolidated financial statements.

    • B. 

      B) Allow foreign companies listed on that country’s stock exchange to use IFRS.

    • C. 

      C) Permit its domestic companies listed on that country’s stock exchange to use IFRS.

    • D. 

      D) Adopt IFRS as that country’s national GAAP.

    • E. 

      E) All of these answer choices are correct.

  • 7. 
    7.  Convergence of accounting standards would not occur by:
    • A. 

      A) FASB adopting an existing IASB standard.

    • B. 

      B) IASB adopting an existing FASB standard.

    • C. 

      C) IASB issuing a new standard.

    • D. 

      D) IASB and FASB jointly developing a new standard.

    • E. 

      E) IASB and FASB each issuing a similar but not identical standard.

  • 8. 
    8.  The types of differences that exist between IFRS and U.S. GAAP would not generally include:
    • A. 

      A) Presentation differences.

    • B. 

      B) Measurement differences.

    • C. 

      C) Disclosure differences.

    • D. 

      D) Comparability differences.

    • E. 

      E) Classification differences.

  • 9. 
    9.  Which of the following is not true about IFRS?
    • A. 

      A) The IASB does not have the ability to enforce proper usage of IFRS.

    • B. 

      B) IFRS is available to any organization or nation that wishes to use those standards.

    • C. 

      C) IFRS is a comprehensive set of financial reporting standards.

    • D. 

      D) IFRS includes only pronouncements issued by the IASB.

    • E. 

      E) IFRS are considered as generally accepted accounting principles.

  • 10. 
    10.  The most relevant factor in determining the purpose of financial reporting is:
    • A. 

      A) The nature of the country’s financing system

    • B. 

      B) The country’s current economic conditions

    • C. 

      C) The ability to control inflation

    • D. 

      D) A strong equity financing system which is more conservative, minimal disclosures, and tight tax laws.

    • E. 

      E) A weak equity financing system which is less conservative, extensive disclosures and loose tax laws.

  • 11. 
    11.  A U.S. company has many foreign subsidiaries and is converting its consolidated financial statements from U.S. GAAP to IFRS.  Which of the following items is not one of the likely accounting issues to resolve for the conversion?
    • A. 

      A) Measuring impairment.

    • B. 

      B) Classifying preferred shares of stock.

    • C. 

      C) Sale and leaseback gain recognition.

    • D. 

      D) Measuring salaries expense.

    • E. 

      E) Prior service cost recognition for defined benefit plans.

  • 12. 
    12.  Foreign companies whose stock is listed on a U.S. stock exchange and using foreign GAAP other than IFRS must file their annual report with the SEC on:
    • A. 

      A) Form 8-A.

    • B. 

      B) Form 10-A.

    • C. 

      C) Form 16-K.

    • D. 

      D) Form 20-F.

    • E. 

      E) Form 20-K.

  • 13. 
    13.  What international organization currently issues IFRS?
    • A. 

      A) IASB.

    • B. 

      B) IASC.

    • C. 

      C) IOSCO.

    • D. 

      D) FASB.

    • E. 

      E) EU.

  • 14. 
    14. IFRS for SMEs are primarily designed to meet the needs of:
    • A. 

      A) Small Manufacturing Enterprises.

    • B. 

      B) Governmental entities.

    • C. 

      C) Companies whose shares of stock are not publicly traded.

    • D. 

      D) Not-for-profit organizations.

    • E. 

      E) Special Model Entities.

  • 15. 
    15.  A company is preparing financial statements using IFRS for the first time for the year ended December 31, 2018. The “transition date” for reporting is
    • A. 

      A) December 31, 2018.

    • B. 

      B) December 31, 2017.

    • C. 

      C) January 1, 2017.

    • D. 

      D) January 1, 2018.

    • E. 

      E) January 1, 2019.

  • 16. 
    16-  A foreign subsidiary of a U.S.-based company has been notified of a loss contingency with an estimated cost ranging between $220,000 and $250,000 which is probable of resulting in an actual loss. Each dollar amount within this range of cost is equally likely of being the actual outcome.        According to IFRS, what is the amount recognized as a provision for loss contingency?
    • A. 

      A) No amount will be recorded but an amount will be disclosed in the notes to the financial statements.

    • B. 

      B) $110,000

    • C. 

      C) $220,000

    • D. 

      D) $235,000       

    • E. 

      E) $250,000

  • 17. 
    17-  Bugs, Inc., a wholly owned subsidiary of the U.S.-based company, Pillows Ltd., was notified of a loss contingency with an estimated cost ranging between $50,000 and $150,000. Bugs, Inc. hired an expert appraiser who assessed that all possible dollar amounts of liability in this range are equally likely. Management of Bugs, Inc. has estimated that there is a 60 percent chance that this contingency will result in an actual loss.       According to U.S. GAAP, what is the amount recognized by Bugs, Inc. as a provision for loss contingency?
    • A. 

      A) No amount will be recorded but an amount will be disclosed in the notes to the financial statements.

    • B. 

      B) $50,000

    • C. 

      C) $60,000

    • D. 

      D) $100,000

    • E. 

      E) $150,000

  • 18. 
    18. The most recent FASB-IASB convergence projects include:
    • A. 

      Leases, Research and Development, Revenue Recognition, and Fair Value Measurement.

    • B. 

      Leases, Revenue Recognition, Fair Value Measurement, and Joint Ventures.

    • C. 

      Insurance Contracts, Post-Employment Benefits, Income Taxes and Impairment

    • D. 

      Insurance Contracts, Income Taxes, Leases, and Revenue Recognition.

    • E. 

      Revenue Recognition, Leases, Insurance Contracts, and Income Taxes.

  • 19. 
    19- Barrel of Oats (BOA), a U.S. company, was acquired by an international company and BOA has a transition date of January 1, 2018 for first-time adoption of IFRS. BOA has a new cereal brand that is ready to be marketed but the company has not yet received copyright approval for the brand’s logo. All costs for development of the copyright were expensed prior to IFRS January 1, 2018.  BOA and its new international parent both have December 31 year-end accounting years. What should BOA do to prepare financial statements for the first time in accordance with IFRS?
    • A. 

      A) Debit development expense and credit copyright for the year ended December 31, 2018.

    • B. 

      B) Debit copyright and credit copyright expense at January 1, 2018.

    • C. 

      C) Debit copyright and credit research and development expense for the year ended December 31, 2017.

    • D. 

      D) Debit copyright and credit stockholders’ equity at January 1, 2018.

    • E. 

      E) Debit stockholders’ equity and credit research and development expense at January 1, 2018.

  • 20. 
    20. Which of the following is not a problem caused by diversity in accounting practices across countries?
    • A. 

      A) Comparing companies in the same industry that are headquartered in different countries.

    • B. 

      B) Translating foreign currency balances into U.S. dollars.

    • C. 

      C) Converting local GAAP financial statements into U.S. GAAP for consolidation purposes.

    • D. 

      D) Maintaining separate accounting records in both the local and U.S. GAAP.

    • E. 

      E) Identifying and retaining personnel who are competent to prepare financial statements in both international and domestic accounting standards.

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