Questions and Answers of International Accounting 3rd Edition

What is proportionate consolidation? Under what circumstances are companies likely to use this method?
How might an analyst obtain the most recent financial statements for a foreign company in which he or she is interested?
How might an analyst obtain the most recent financial statements for a foreign company in which he or she is interested?
The following Statement of Added Value (in millions of Brazilian reals) was presented in the 2009 annual report of Vale S.A., a Brazilian mineral products company:Required:a. Identify the external
What is treaty shopping?
Which of the following items is not a tax benefit provided by Congress to U.S. citizens working abroad? a. Foreign earned income exclusion. b. Foreign tax credit.
Which of the following is not a method commonly used for establishing transfer prices?a. Cost-based transfer price.b. Negotiated price.c. Market-based transfer price.d. Industrywide transfer price.
U.S. Treasury Regulations require the use of one of five specified methods to determine the arm’s-length price in a sale of tangible property. Which of the following is not one of those methods?a.
Market-based transfer prices lead to optimal decisions in which of the following situations?a. When interdependencies between the related parties are minimal.b. When there is no advantage or
Vale S.A., a Brazilian mineral products company, provided the following note on a voluntary basis in its 2009 annual report: 11—Cash Generation (Unaudited) Consolidated operating cash
Gamma Holding NV, a Dutch textile company, presented the following calculation of operating profi t in its 2009 consolidated income statement:Required:a. Determine whether finished products and work
Neopost SA is a French company operating mainly in Europe and the United States that sells and leases mailroom equipment. In accordance with IFRS, the company capitalizes development costs when
Gamma Holding NV, a Dutch textile company, provided the following information in its consolidated income statement for the year 2009 (note that “result” is equivalent to “income”):Notes to
Explain why the legal concept of control may be appropriate in some countries, such as Japan.
What is a group? Compare and contrast the different concepts of a group.
The Vanguard Group is an investment firm with more than 50 different mutual funds in which the public may invest. Among these funds are 13 international funds that concentrate on investments in
Jardine Matheson Group (Part 1)With its broad portfolio of market-leading businesses, the Jardine Matheson Group is an Asian-based conglomerate with extensive experience in the region. Its business
What is the IASB’s principles-based approach to accounting standard setting?
The chapter describes different phases in the harmonization efforts of the IASC.Required:Identify one such phase and prepare a brief report describing its importance in the overall scheme of
When an entity chooses the revaluation model as its accounting policy for measuring property, plant, and equipment, which of the following statements is correct?a. When an asset is revalued, the
In what way does the fair value model for investment property differ from the revaluation model for property, plant, and equipment?
Which of the following best describes the accounting for goodwill subsequent to initial recognition?a. Goodwill is amortized over its expected useful life, not to exceed 20 years.b. Goodwill is
An entity must adjust its financial statements for an event that occurs after the end of the reporting period ifa. The event occurs before the financial statements have been approved for issuance and
In selecting an accounting policy for a transaction, which of the following is the first level within the hierarchy of guidance that should be considered?a. The most recent pronouncements of other
An entity can justify a change in accounting policy ifa. The change will result in a reliable and more relevant presentation of the financial statements.b. The entity encounters new transactions that
Which intangible assets are subject to annual impairment testing?
To determine the amount at which inventory should be reported on the December 31, Year 1 balance sheet, Monroe Company compiles the following information for its inventory of Product Z on hand at
This exercise consists of two parts.Part A. The following table summarizes the assets of the Rocker Division (a separate cash-generating unit) at December 31, Year 5, prior to testing goodwill for
S. A. Harrington Company is a U.S.-based company that prepares its consolidated financial statements in accordance with U.S. GAAP. The company reported income in 2011 of $5,000,000 and
Bull Arm Company has the following items at December 31, Year 1:• $200,000, 5 percent note payable, due March 15, Year 2. The company has reached an agreement with the bank to refinance the note
Melbourne Inc. became involved in a tax dispute with the national tax authority. Melbourne’s legal counsel indicates that there is a 70 percent likelihood that the company will lose this dispute
Past service cost related to nonvested employees should be recognized as expense a. In the period the cost is incurred.b. Over the nonvested employees’ remaining vesting period.c. Over the
When stock options are granted to employees, what is the basis for determining the amount of compensation cost that will be recognized as expense?a. The fair value of the service provided by the
At what point in time should a company recognize the liability and expense associated with termination benefits? What is the basis for measuring the amount of termination benefits to recognize?
Sinto Bem Company issues a two-year note paying 5 percent interest on January 1, Year 1. The note sells for its par value of $1,000,000, and the company incurs issuance costs of $22,000. Which of the
Costs incurred to accomplish a less than substantial debt modification, such as an interest rate adjustment, are treated in which of the following ways?a. Expensed immediately.b. Increase the
On December 31, Year 1, Airways Corp. issued $1 million in bonds at 5 percent annual interest, due December 31, Year 6 at a discount of $100,000. Airways incurred bank fees of $100,000, legal fees of
How is an exchange of goods that are similar in nature and value accounted for?
On January 1, Year 1, the Hoverman Corporation made amendments to its defined benefit pension plan, resulting in $150,000 of past service costs. The plan has 100 active employees, of which 60 are
The Northeastern Company has a defined benefit pension plan. The company’s actuary has determined that a loss has occurred at the beginning of Year 1 caused by demographic changes related to the
On January 2, Year 1, Argy Company’s board of directors granted 12,000 stock options to a select group of senior employees. The requisite service period is three years, with one-third of the
The Campolino Company has a defined benefit post-retirement health care plan for its employees. At the beginning of Year 1, Campolino amended the plan to provide additional benefits to all employees.
What happens if a significant amount of held-to-maturity investments is reclassified as available-for-sale?
How are costs associated with the issuance of bonds payable accounted for?
China Petroleum and Chemical Corporation China Petroleum and Chemical Corporation (CPCC) is one of a growing number of Chinese companies that has cross-listed its stock on foreign stock exchanges. To
Portofino Company made purchases on account from three foreign suppliers on December 15, 2009, with payment made on January 15, 2010. Information related to these purchases is as follows:Portofino
Assuming a forward contract to sell 100,000 Israeli shekels was entered into on December 1, Year 1, as a fair value hedge of a foreign currency receivable, what would be the net impact on net income
What was the net impact on Keefer Company’s Year 1 income as a result of this fair value hedge of a firm commitment? a. $0. b. An $860.60 decrease in income.
What is the net impact on Black Lion Company’s Year 1 net income as a result of this hedge of a forecasted foreign currency purchase?a. $0. b. A $200 increase in net income.
What is hedge accounting?
Which of the following items is normally translated the same way under both the current rate and temporal methods of translation? a. Inventory b. Equipment
In translating the financial statements of a foreign subsidiary into the parent’s reporting currency under the current rate method, which of the following statements is true? a. Expenses are
A foreign subsidiary of Wampoa Ltd. has one asset (inventory) and no liabilities. The subsidiary operates with a significant degree of autonomy from Wampoa and primarily uses the local currency (the
Which of the following best explains how a translation loss arises when the temporal method of translation is used to translate the foreign currency financial statements of a foreign subsidiary?
Which method of translation maintains, in the translated financial statements, the underlying valuation methods used in the foreign currency financial statements? a. Current rate method;