Questions and Answers of International Financial Reporting And Analysis

In Kern’s comparative ratio analysis, the 2018 inventory turnover ratio for Century Chocolate is closest to:A . 5.07.B . 5.42.C . 5.55.Hans Annan, CFA, a food and beverage analyst, is reviewing
Using the inventory record for purchased lemon drops shown in Exhibit 4, the cost of sales for 2018 will be closest to:A . CHF 3,550.B . CHF 4,550.C . CHF 4,850.Hans Annan, CFA, a food and beverage
Ignoring any tax effect, the 2018 net realizable value reassessment for the black licorice jelly beans will most likely result in:A . an increase in gross profi t of CHF 7,775.B . an increase in
After translating Consol-Can’s December 31, 20X2 balance sheet into the parent company’s currency (US$), the translated value of retained earnings will be c losest to:A . $41 million.B . $44
In response to the board’s second question, Templeton should reply that if the change is made, the consolidated fi nancial statements for Consolidated Motors would begin to recognize:A . realized
In response to the board’s third question, Templeton should note that the change will most likely aff ect:A . the cash ratio.B . fi xed asset turnover.C . receivables turnover.
In response to the board’s fourth question, the balance sheet exposure (in C$ millions)would be closest to:A . –19.B . 148.C . 400.
When translating Acceletron’s fi nancial statements into US dollars, Redline is least likely to use an exchange rate of USD per SGD:A . 0.671.B . 0.588.C . 0.654.
Which transaction would generate foreign currency transaction exposure for Ambleu?A . Transaction 1 B . Transaction 2 C . Transaction 3
Yu’s determination regarding Transaction 2 should be based on the currency of the:A . loan.B . bank.C . borrower.
Based on Exhibit 1, what is the foreign exchange gain resulting from Transaction 3 on the December 31, 2016 fi nancial statements?A . NVK1.70 per ton B . NVK90.75 per ton C . NVK248.54 per ton
What is the best response to Question 1?A . Yes B . No, because it would reduce organic sales growth C . No, because it would reduce net price realization and mix Question 1If Ukraine’s economy
That Ambleu should disclose:A . a restatement for local infl ation.B . that assets carried at historical cost are translated at historical rates.C . the amount of foreign exchange diff erences
The amount that Ambleu should include in its December 31, 2017 revenue from Cendaró is closest to:A . NVK10.60 million.B . NVK13.25 million.C . NVK19.73 million.
The change in Ambleu’s consolidated income tax rate from 2016 to 2017 most likely resulted from a:A . decrease in Ambleu’s domestic tax rate.B . more profi table business mix in its
The cumulative translation loss recognized by Ambleu related to the patent purchase on the December 31, 2017 fi nancial statements is closest to:A . NVK0.39 million.B . NVK1.58 million C . NVK9.12
The total intangible assets on Ngcorp’s balance sheet as of December 31, 2016 are closest to:A . ₣B12.54 million.B . ₣B12.71 million.C . ₣B13.04 million.
Janssen’s translation method, total assets for Triofi nd-B translated into Triofi nd’s presentation currency as of December 31, 2016 are c losest to:A . NER1,375,000.B . NER1,380,252.C .
The translation adjustment for Triofi nd-B’s liabilities into Triofi nd’s presentation currency for the six months ended December 31, 2016 is:A . negative.B . zero.C . positive.
Janssen’s translation method, retained earnings for Triofind-B translated into Triofi nd’s presentation currency as of June 30, 2017 are closest to:A . NER150,225.B . NER170,940.C . NER172,414.
Th e functional currency for Triofi nd-A’s sale of mobile phones to a customer in Certait is the:A . Certait real.B . Norvolt euro.C . Abuelio peso.
The value of the new warehouse in Abuelio on Triofi nd’s balance sheet as of July 31, 2017 is closest to:A . NER31,452.B . NER47,964.C . NER50,000.
Relative to its domestic tax rate, Triofi nd’s eff ective tax rate is most likely:A . lower.B . the same.C . higher.
The country with the highest sustainable sales growth is:A . Norvolt.B . Abuelio.C . Borliand.
Which of Smith’s statements regarding banks is correct?A . Only Statement 1 B . Only Statement 2 C . Both Statement 1 and Statement 2
Th e aspect of the Basel III framework that Johansson describes to Smith relates to minimum:A . capital requirements.B . liquidity requirements.C . amounts of stable funding requirements.
One limitation of the approach used by Johansson to evaluate banks is that it fails to address a bank’s:A . sensitivity to market risk.B . management capabilities.C . competitive environment.
Th e best indicator of the operations of a P&C insurance company emphasized by Johansson when evaluating P&C insurance companies is the:A . combined ratio.B . underwriting loss ratio.C . underwriting
Which of the diff erences between P&C insurers and L&H insurers noted by Smith is incorrect ?A . Diff erence 1 B . Diff erence 2 C . Diff erence 3
Smith should conclude that the insurer with the most effi cient underwriting operation is:A . Insurer A.B . Insurer B.C . Insurer C.
Smith and Johansson should conclude that over the past three years, ABC Bank’s:A . liquidity position has declined.B . capital adequacy has improved.C . sensitivity to market risk has improved.
Paulinic’s analysis of the two insurance companies most likely indicates that:A . Cobalt has more-predictable claims than Vermillion.B . Cobalt has a higher capital requirement than Vermillion.C .
Based only on the information in Exhibit 1, in 2017 Vermillion m ost likely:A . experienced a decrease in overall effi ciency.B . improved its ability to estimate insured risks.C . was more effi
Based only on Exhibit 2, which of the following statements is correct?A . Th e quality of earnings for R-bank was the highest in 2009.B . Relative to the other banks, N-bank has the highest quality
Based only on Exhibit 3, Paulinic should conclude that:A . trading activities are riskier at T-bank than N-bank.B . trading revenue per unit of risk has improved more at N-bank than T-bank.C .
R-bank’s use of credit derivatives since 2007 m ost likely:A . increased posted collateral.B . decreased the volatility of earnings from trading activities.C . indicates consistent correlations
Based on Statement 1, the net interest margin for the three banks’ most likely will:A . decrease.B . remain unchanged.C . increase.
Based on Statement 2, the fi nancial ratio m ost directly aff ected is the:A . Tier 2 capital ratio.B . net stable funding ratio.C . liquidity coverage ratio.
Which of the following industries most likely has the highest level of global systemic risk?A . Industry A B . Industry B C . Industry C
Company XYZ’s capital adequacy over the last three years, as measured by the three key capital ratios, signals conditions that are:A . mixed.B . declining.C . improving.
Asset composition from 2015 to 2017 indicates:A . declining liquidity.B . increasing risk based on the proportion of total loans to total assets.C . decreasing risk based on the proportion of
The trend in impairment allowances is refl ective of the changes in:A . impaired assets.B . strong credit quality assets.C . past due but not impaired assets.
A loan loss analysis for the last three years indicates that:A . Company XYZ has become less conservative in its provisioning for consumer loans.B . the provision for commercial loan losses has
Which of the following supplemental factors is consistent with a favorable assessment of Company XYZ’s fi nancial outlook?A . Competitive environment B . Net benefi t plan obligation C .
Which of Pereira’s statements describes an accounting warning sign of potential overstatement or non-sustainability of operating and/or net income?A . Statement 1 B . Statement 2 C . Statement 3
Which of Pereira’s statements about Miland Communications is most likely a warning sign of potential earnings manipulation?A . Th e trend in inventory turnover B . Th e trend in receivables
Based on the regression model used by Pereira, earnings persistence for Miland would be highest if:A . β1 is less than 0.B . β1 is greater than β2 .C . β2 is greater than β1 .
Which of Pereira’s statements regarding the use of quantitative models to assess the likelihood of misreporting is correct?A . Only Statement 4 B . Only Statement 5 C . Both Statement 4 and
Which variable in the Beneish model has a year-over-year change that would increase Miland’s likelihood of manipulation?A . DSR B . LEVI C . SGAI
Based on Pereira’s determination of recurring and non-recurring expenses for Miland, the company’s recurring or core pre-tax earnings last year is c losest to:A . $4.3 billion.B . $4.8 billion.C
After adjusting the Globales, Inc. income statement for the two possible misstatements, the decline in net income is closest to:A . EUR37.5 million.B . EUR112.5 million.C . EUR150.0 million.
Pereira should forecast that the ROE for Globales is likely to decline:A . more slowly than that of the industry competitor.B . at the same rate as the industry competitor.C . more rapidly than that
Which of Webster’s notes about BIG Industrial provides an accounting warning sign of a potential reporting problem?A . Only Note 1 B . Only Note 2 C . Both Note 1 and Note 2
Do either of Webster’s Notes 4 or 5 about Construction Supply describe an accounting warning sign of potential overstatement or non-sustainability of operating income?A . No B . Yes, Note 4
Based on Webster’s research notes, which company would most likely be described as having high-quality cash fl ow?A . BIG Industrial B . Construction Supply C . Dynamic Production
Based on the Beneish model results for 2017, which company has the highest probability of being an earnings manipulator?A . BIG Industrial B . Construction Supply C . Dynamic Production
Based on the information related to its restatement, Dynamic Production reported poor operating cash fl ow quality in 2016 by understating:A . inventories.B . net income.C . trade receivables.
Webster’s concern about BIG Industrial’s inventory suggests poor reporting quality, most likely resulting from a lack of:A . completeness.B . clear presentation.C . unbiased measurement.
In response to Dodd’s request, Webster’s recalculated return on sales will most likely:A . decrease.B . remain the same.C . increase.
Bickchip’s cash-fl ow-based accruals ratio in 2020 is closest to:A . 9.9%.B . 13.4%.C . 23.3%.
Th e cash-fl ow-based accruals ratios from 2018 to 2020 indicate:A . improving earnings quality.B . deteriorating earnings quality.C . no change in earnings quality.
Th e participant bears the greatest amount of investment risk under which plan?A . Plan A B . Plan B C . Plan C
Th e plan for which the amount of SKI’s fi nancial obligation is defi ned in the current period with no obligation for future retirement benefi ts is:A . Plan A.B . Plan B.C . Plan C.
For Plan A, SKI should report a net pension:A . asset of €1.50 billion.B . asset of €1.18 billion.C . liability of €1.18 billion.
Based on the FC chair’s explanation about the current service cost change, the present value of Plan A’s obligation:A . decreased.B . stayed the same.C . increased.
Based on Note 16, after reclassifying pension components to refl ect economic income or expense, the net adjustment to profi t before taxation is:A . –€205 million.B . –€94 million.C .
Based on the case study illustration and the eff ect of changing the annual compensation rate, the annual unit credit for the average participant would decrease by an amount closest to:A . €4,349.B
All else being equal, which of the following FC recommendations will increase the plan’s obligation?A . Recommendation 1 B . Recommendation 2 C . Recommendation 3
Th e current service cost is closest to:A . $14,152.B . $15,758.C . $17,907.
Which of Rickards’s statements about the PVDBO is correct?A . Statement 1 B . Statement 2 C . Statement 3
Based on Exhibit 1, the PVDBO is closest to:A . $3,585 million.B . $3,633 million.C . $3,681 million.
Based on Exhibit 1 and the method XYZ uses to link pension benefi ts to salaries, the change in the compensation growth rate compared with the prior period will most likely result in:A . lower
Based on the change in the assumed future compensation growth rate presented in Exhibit 1, which of the following pension cost components is aff ected?A . Service cost B . Remeasurement C . Net
Based on Exhibit 2, Rickards should adjust the operating and fi nancing cash fl ows by:A . $21 million.B . $30 million.C . $96 million.
Based on Exhibits 2 and 3, as well as Holmstead’s assumption about future health care infl ation, the debt-to-equity ratio calculated by Rickards for XYZ should be closest to:A . 2.69.B . 2.71.C .
Which costs incurred with the purchase of property and equipment are expensed?A . Delivery charges.B . Installation and testing.C . Training required to use the property and equipment.
When constructing an asset for sale, directly related borrowing costs are m ost likely:A . expensed as incurred.B . capitalized as part of inventory.C . capitalized as part of property, plant, and
Costs incurred for intangible assets are generally expensed when they are:A . internally developed.B . individually acquired.C . acquired in a business combination.
Under US GAAP, when assets are acquired in a business combination, goodwill most likely arises from:A . contractual or legal rights.B . assets that can be separated from the acquired company.C .
All else equal, in the fi scal year when long-lived equipment is purchased:A . depreciation expense increases.B . cash from operations decreases.C . net income is reduced by the amount of the
Companies X and Z have the same beginning-of-the-year book value of equity and the same tax rate. Th e companies have identical transactions throughout the year and report all transactions similarly
A company purchases a piece of equipment for €1,500. Th e equipment is expected to have a useful life of fi ve years and no residual value. In the fi rst year of use, the units of production are
A company purchases equipment for $200,000 with a fi ve-year useful life and salvage value of zero. It uses the double-declining balance method of depreciation for two years, then shifts to
A company acquires a patent with an expiration date in six years for ¥100 million. Th e company assumes that the patent will generate economic benefi ts that will decline over time and decides to
A company is comparing straight-line and double-declining balance amortization methods for a non-renewable six-year license, acquired for €600,000. Th e diff erence between the Year 4 ending net
Under IFRS, an impairment loss on a property, plant, and equipment asset is measured as the excess of the carrying amount over the asset’s:A . fair value.B . recoverable amount.C . undiscounted
Th e impairment of intangible assets with fi nite lives aff ects:A . the balance sheet but not the income statement.B . the income statement but not the balance sheet.C . both the balance sheet and
Th e gain or loss on a sale of a long-lived asset to which the revaluation model has been applied is most likely calculated using sales proceeds less:A . carrying amount.B . carrying amount adjusted
Which of the following is a required fi nancial statement disclosure for long-lived intangible assets under US GAAP?A . Th e useful lives of assets.B . Th e reversal of impairment losses.C .
Under the revaluation model for property, plant, and equipment and the fair model for investment property:A . fair value of the asset must be able to be measured reliably.B . net income is aff ected
Under IFRS, what must be disclosed under the cost model of valuation for investment properties?A . Useful lives.B . Th e method for determining fair value.C . Reconciliation between beginning and
Jordan’s response about the fi nancial statement impact of Alpha’s decision to capitalize the cost of its new computer system is most likely correct with respect to:A . lower net income.B . lower
Jordan’s response about the impact of the diff erent depreciation methods on net profi t margin is most likely incorrect with respect to:A . accelerated depreciation.B . straight-line
Jordan’s response about his approach to estimating a company’s need to reinvest in its productive capacity is most likely c orrect regarding:A . estimating the average age of the asset base.B .
Jordan’s response about the eff ect of Beta’s impairment loss is most likely incorrect with respect to the impact on its:A . debt to total assets.B . fi xed asset turnover.C . cash fl ow from
Jordan’s response about the eff ect of Alpha’s revaluation is most likely correct with respect to the impact on its:A . return on equity.B . return on assets.C . debt to capital ratio.
In early 2018 Sanborn Company must pay the tax authority €37,000 on the income it earned in 2017. Th is amount was recorded on the company’s December 31, 2017 fi nancial statements as:A . taxes
In Year 3, the company’s US GAAP income statement recorded a provision for income taxes c losest to:A . $30,632.B . $54,144.C . $58,772.
Th e company’s eff ective tax rate was h ighest in:A . Year 1.B . Year 2.C . Year 3.
Zimt AG presents its fi nancial statements in accordance with US GAAP. In Year 3, Zimt discloses a valuation allowance of $$1$,101 against total deferred tax assets of $$19$,201. In Year 2, Zimt

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