Questions and Answers of Comparative International Accounting

The parent company balance sheet for Babcock International Group PLC at March 31, 2017, is as follows: Required: Transform Babcock’s March 31, 2017, company balance sheet to a format and
What is the implication from the modified Gray framework for the use of a common set of financial reporting standards across all countries?
How are the Anglo and less-developed Latin cultural areas expected to differ with respect to the accounting values of conservatism and secrecy?
According to Gray, how does national culture affect the development of a country’s accounting system?
In general terms, how is financial reporting different in the Anglo-Saxon model of accounting from the Continental European model of accounting?
What are the two common methods used internationally for the order in which assets are listed on the balance sheet? Which of these two methods is most common in North America? In Europe?
What would be the advantages of having a single set of financial reporting standards used worldwide?
Volkswagen AG and Daimler AG, both based in Germany, are two of the largest automobile manufacturers in the world. The following information was provided in each company’s 2016 annual
In February 2010, the U.S. SEC issued Release No. 33-9106, Commission Guidance Regarding Disclosure Related to Climate Change. Name three sections of the Form 10-K potentially affected by this
Why do auto companies have larger Scope 3 emissions than Scope 1 emissions?
What industry dominates the list of the world’s largest Scope 1 emitters?
What are Scope 1 emissions and how do they differ from Scope 2 and Scope 3 emissions?
What is a proxy cost of carbon?
What is a carbon dioxide equivalent and how is it measured?
Carbon accounting standards allow companies to use several methods of determining the boundaries between Scope 1/Scope 2 and Scope 3 activities. Similar to most large companies, BHP Billiton (BHP)
What is the primary difference between the GRI and the Sustainability Accounting Standards Board (SASB)?
Joliet 29, owned by NRG Energy, was the largest emitter of CO2- e in northern Illinois in 2015. The plant’s emissions during that year were as follows:
Clarion Bank and Trust (CBT) is a local bank based in a small town in the American Midwest. The town’s only other bank, a branch of a large multinational, recently closed. Based on research
What is the comply-or-explain approach to mandatory reporting?
Garner Pharmaceuticals is a U.S. drug company that manufactures eye medications. Based on research conducted at the SASB, one of the following sustainability topics is substantially more likely to be
What is materiality and how is it measured within the GRI framework?
Imperial Petroleum plc is a multinational oil and gas company based in the United Kingdom with substantial offshore production and exploration activities. Imperial prepares an annual sustainability
What are the four categories into which GRI standards are divided?
Apple Inc.’s supplier responsibility report is among the most widely followed sustainability disclosures in the world. The 2018 Supplier Responsibility Report is at
What is GRI-informed reporting?
Continue to refer to Marks and Spencer’s (M&S) 2017 Plan A report in answering the following questions about the company’s carbon accounting. Required: a. M&S claims to be the
What is the Global Reporting Initiative (GRI)?
Marks and Spencer (M&S) is a multinational retailer headquartered in London. Its 2017 sustainability report, known as Plan A, is at http://planareport.marksandspencer.com. Required: a.
What are the theories often used to explain the sustainability reporting practices of firms?
Modco was founded in 1960, with the opening of the first Modco discount store, and was incorporated as Modco Stores Inc. in January 1970. The company’s shares were listed on the NYSE in 1975. Modco
Nestlé is the world’s largest food producer and is headquartered in Switzerland. Its 2017 sustainability report is available at https://www.nestle.com/csv/downloads. Use the report to answer the
Describe the many aspects of the audit expectation gap.
The following incomplete sentences (when completed) relate to aspects of corporate governance: a. _____ should be supplied in a timely manner with information in a form and of a quality
There is no agreement internationally on how to address the issue of auditor liability. Required: Describe the approach taken in your own country in addressing the issue of auditor
This chapter refers to the concept of accounting infrastructure, which encompasses the various environmental factors affecting the issues concerning auditing in a particular
Auditing is likely to be affected in the future by the changing conditions in the world economy. Required:Identify some of these changing conditions in the world economy and their likely effect
What provisions in U.S. audit standards are aimed at improving corporate governance?
What is the link between auditing and corporate governance?
What is the advantage of using a projected future exchange rate to translate both the local currency operating budget and actual results into parent currency?
Duncan Street Company (DSC), a British company, is considering establishing an operation in the United States to assemble and distribute smart speakers. The initial investment is estimated to be
When actual results are compared to an operating budget, under what conditions might it be appropriate to hold the manager of a foreign subsidiary responsible for an exchange rate variance as part
Viking Corporation (a U.S.-based company) has a subsidiary in Japan that imports finished products from unrelated suppliers in China and sells all of its purchases to customers in Japan. Cost of
How can a local currency operating budget and actual results be translated into parent currency without holding the foreign manager responsible for foreign exchange risk?
Woodlands Company (a U.S.-based company) has a subsidiary in Mexico that exports all of its production to customers in Asian markets and sources all of its inputs locally. Budgets in Mexican pesos
In evaluating the performance of a manager of a foreign subsidiary, what issues are associated with the calculation of profit?
Fitzwater Limited (an Irish company) has a foreign subsidiary in Norway, whose manager is evaluated on the basis of profit in euros (EUR). In the current year, the foreign subsidiary was budgeted to
Philadelphia, Inc. (a Greek company) has a foreign subsidiary in Morocco, whose manager is evaluated on the basis of profit in euros (EUR). In the current year, the foreign subsidiary was budgeted to
When might it be appropriate to evaluate the performance of a foreign subsidiary in terms of local currency rather than in terms of parent company currency?
Stratford Industries, Inc., has a foreign operation with the following current year contribution margin income statement (amounts in foreign currency, FC): Sales
Imogdi Corporation (a U.S-based company) has a wholly-owned subsidiary in Argentina, whose manager is being evaluated on the basis of the variance between actual profit and budgeted profit in U.S.
How does an ethnocentric organizational structure of a MNC differ from a polycentric organizational structure?
Havel Robotics Company (a U.S.-based firm) exports 25,000 industrial robots per year to China under an agreement that covers a 5-year period. In China, the robots are sold for the RMB (Chinese
In foreign investment analysis, what are the two methods used to incorporate factors affecting cash flows that vary across countries?
How does the evaluation of a potential foreign capital investment differ under the parent company perspective versus under the project perspective?
All Kiwi Ltd. (a New Zealand-based company) has a wholly owned subsidiary in Malaysia whose manager is being evaluated on the basis of the variance between actual profit and budgeted profit in New
What makes calculation of NPV for a foreign investment project more complex than the calculation of NPV for a domestic project?
Foursquare Technology Corp. established foreign operations in Lithuania and Taiwan in the current year. Corporate management has decided to evaluate the foreign operations and their managers on the
What are the three pieces of information needed to calculate the net present value (NPV) of a potential capital investment, whether domestic or foreign?
Late in 2018, Felix Machine Company (FMC) management was considering expansion of the company?s international business activities. FMC is a South Carolina?based manufacturer of compound machines for
Vlado Corporation (a U.S.-based company) has a wholly-owned subsidiary in Moldova that manufactures insulated wire at a cost of $3 per meter. Vlado imports the insulated wire and sells it to U.S.
Raval Company, based in Sydney, Australia, has a wholly-owned subsidiary in Singapore. The Singaporean subsidiary manufactures bicycles at a cost equal to A$20 per bicycle, which it sells to Raval at
Banff Limited (a Canadian company) imports die-cast parts from its Taiwanese subsidiary that are used in the production of children’s toys. Per unit, part 169 costs the Taiwanese subsidiary C$10.00
The greatest number of advance pricing agreements have been negotiated with the IRS for which type of intercompany transaction? a. Sales of tangible property. b. Licenses of intangible
Why is there often a conflict between the performance evaluation and cost-minimization objectives of transfer pricing?
International Lamp Company (ILC), a U.S. taxpayer, manufactures crystal chandeliers at its wholly-owed subsidiary in Poland (Polampa) at a production cost of $185 per chandelier. Polampa chandeliers
Which of the following items is not a tax benefit available to U.S. taxpayers working abroad? a. Foreign earned income exclusion. b. Foreign tax credit.c. Dividend income exclusion. d.
in Singapore that generated income before tax of 1,000,000 Singaporean dollars (SGD) in the current year. The foreign branch paid income taxes to Singapore at the rate of 17 percent evenly throughout
Fina Corporation is a U.S.-based taxpayer that provides logistics services to companies in the food products industry. Fina is wholly owned by a company headquartered in Asia. Fina’s U.S. taxable
Caragua Corporation’s foreign subsidiaries generated aggregate before-tax income of $42,000,000 in the current year, upon which they paid corporate income tax at an average rate of 15 percent.
For an individual taxpayer in the United States, what benefit is provided by the foreign housing cost exclusion?
How does an individual taxpayer in the United States qualify for the foreign earned income exclusion?
For an individual taxpayer in the United States, what benefit is provided by the foreign earned income exclusion?
Streep Company (a U.S.-based company) has branches in three countries: X, Y, and Z. All three branches sell goods and services in their host country. Income tax rates on branch profits in these three
Capistrano Corporation, whose reporting currency is the franc (F), establishes a foreign subsidiary, whose reporting currency is the escudo (E). On January 1, Year 1, Capistrano contributes Cash of
What procedures are used to translate the foreign currency income of a foreign operation into U.S. dollars for U.S. tax purposes?
Fullerton Company (a U.S. taxpayer) has wholly-owned subsidiaries located in Hungary and Hong Kong. The Hungarian operation purchases electric generators manufactured by Fullerton and sells them
What are the major international tax provisions in the Tax Cuts and Jobs Act that became effective in the United States in 2018?
What is the maximum amount of foreign tax credit that a U.S. company is allowed to take with respect to the income earned by a foreign operation?
Boston Beanery, a U.S.-based company, establishes a branch in Great Britain in January of Year 1, when the exchange rate is US$1.30 per British pound (£). During Year 1, the British branch
What are the methods used by the United States to reduce the double taxation of income earned by foreign operations of U.S. companies? a. Exempting some foreign source income and allowing a
King Street Bakery, Inc., a U.S. company, has a branch located in Cabo Marco and another in the Windswept Islands. The beforetax income earned by the Cabo Marco branch is $100,000, and the before-tax
Under U.S. tax law, what is a controlled foreign corporation (CFC)? What is Subpart F income?
In Year 3, how much excess foreign tax credit can Rawl carry back? a. $7,500. b. $6,000. c. $1,000. d. $0.
How are foreign branch income and foreign subsidiary income taxed differently by the United States?
For Year 3, what is the net U.S. tax liability? a. $0. b. $1,000. c. $6,000. d. $21,000.
For Year 1, Year 2, and Year 3, what is the foreign tax credit allowed in the United States? a. $8,250, $15,000, and $21,000.b. $8,250, $15,000, and $22,000.c. $15,750, $21,000, and $22,000.d.
What is the purpose of the OECD’s base erosion and profit shifting action plan?
What is base erosion and profit shifting (BEPS)?
Why might companies have an incentive to finance their foreign operations with as much debt as possible? a. Interest payments are generally tax-deductible. b. Withholding rates are lower
Worldwide United Corporation (WUC), a U.S. taxpayer, manufactures and sells products through a network of foreign branches and wholly-owned foreign subsidiaries. Relevant information for these
Doner Company Inc. established a foreign subsidiary on January 1, Year 1. The subsidiary’s financial statements in foreign currency (FC) for the year ended December 31, Year 1, appear as
TBD Corporation (a U.S.-based company) acquired 100 percent of a Swiss company for 8.2 million Swiss francs on December 20, Year 1. At the date of acquisition, the exchange rate was $1.00 per franc.
Velky s.r.o. (a Czech company) invests 1,200,000 schillings in a foreign subsidiary on January 1, Year 1. The subsidiary commences operations on that date and generates net income of 400,000
Which balance sheet accounts give rise to purchasing power gains, and which accounts give rise to purchasing power losses?
The Year 1 financial statement of the Chinese subsidiary of Singcom Limited (a Singapore-based company) revealed the following: Singapore dollar (SGD) exchange rates for 1 CNY are as
What procedures does IFRS require when translating the foreign currency financial statements of a foreign operation located in a hyperinflationary economy?
The functional currency of Garland Inc.’s Japanese subsidiary is the Japanese yen. Garland borrowed Japanese yen as a partial hedge of its investment in the subsidiary. How should the transaction
In accordance with International Financial Reporting Standards (IFRS), which translation combination would be appropriate for a foreign operation whose functional currency is the currency of the host
In accordance with U.S. generally accepted accounting principles (GAAP), which translation combination would be appropriate for a foreign operation whose functional currency is the U.S. dollar?
Which one of the following items is remeasured using the current exchange rate under the temporal method? a. Accounts payable. b. Dividends declared. c. Additional paid-in

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