Question 1

With regard to convergence of accounting for business combinations between IFRS and U.S.GAAP, the major changes to U.S.GAAP include:

Accepted Answer

A) classifying noncontrolling interests as assets. 
B) use of acquisition method for business combination. 
C) recognizing in-process research and development costs as expense. 
D) recognizing incurred research costs as liabilities. 
A) classifying noncontrolling interests as assets. 
B) use of acquisition method for business combination. 
C) recognizing in-process research and development costs as expense. 
D) recognizing incurred research costs as liabilities.

Question 2

Which of the following statements is true about pooling of interests method of accounting for business combinations?

Accepted Answer

A) The pooling of interests method is no longer acceptable under IFRS. 
B) Goodwill arises only when the pooling of interests method is used for business combinations. 
C) Pooling of interests is used for international consolidations but never for domestic consolidations. 
D) The purchase method is used only when less than 100% of an entity's voting shares are acquired. 
A) The pooling of interests method is no longer acceptable under IFRS. 
B) Goodwill arises only when the pooling of interests method is used for business combinations. 
C) Pooling of interests is used for international consolidations but never for domestic consolidations. 
D) The purchase method is used only when less than 100% of an entity's voting shares are acquired.

Question 3

Which method most closely represents the requirement of IAS 29 for reporting financial statements of companies in hyperinflationary economies?

Accepted Answer

A) Current replacement cost. 
B) General purchasing power. 
C) Historical cost for non-monetary assets and current replacement cost for monetary assets. 
D) Companies have a choice between current replacement cost and general purchasing power methods. 
A) Current replacement cost. 
B) General purchasing power. 
C) Historical cost for non-monetary assets and current replacement cost for monetary assets. 
D) Companies have a choice between current replacement cost and general purchasing power methods.

Question 4

Which of the following terms is often used to describe the equity method of accounting?

Accepted Answer

A) The 20% rule 
B) One-line consolidation 
C) Significant influence 
D) Disaggregated consolidation 
A) The 20% rule 
B) One-line consolidation 
C) Significant influence 
D) Disaggregated consolidation

Question 5

Which method of accounting for inflation is used under U.S.GAAP?

Accepted Answer

A) Current Replacement Cost method 
B) General Purchasing Power method 
C) Both Current Replacement Cost and General Purchasing Power methods must be used 
D) Inflation accounting is not required under U.S.GAAP. 
A) Current Replacement Cost method 
B) General Purchasing Power method 
C) Both Current Replacement Cost and General Purchasing Power methods must be used 
D) Inflation accounting is not required under U.S.GAAP.

Question 6

A representative market basket of products cost $250 at the beginning of the year, and the same collection of products costs $280 at the end of the year.What is the annual rate of inflation?

Accepted Answer

A) 10.7% 
B) 12% 
C) 112% 
D) -10.7% 
A) 10.7% 
B) 12% 
C) 112% 
D) -10.7%

Question 7

According to IAS 27, how can effective control be achieved without owning more than 50% of another company's voting shares?

Accepted Answer

A) Representation on the company's board of directors 
B) Being the primary entity exercising voting rights 
C) Through a contract between the entities 
D) All of the above may result in control by one corporation over another. 
A) Representation on the company's board of directors 
B) Being the primary entity exercising voting rights 
C) Through a contract between the entities 
D) All of the above may result in control by one corporation over another.

Question 8

IFRS 8 adopts which approach to report segmented financial information?

Accepted Answer

A) Geographic approach 
B) Business lines approach 
C) Management approach 
D) Asset test approach 
A) Geographic approach 
B) Business lines approach 
C) Management approach 
D) Asset test approach

Question 9

Under U.S.GAAP and IASB standards, the threshold for determining "significant influence" in an associate enterprise is:

Accepted Answer

A) 50% ownership of voting shares. 
B) 5% ownership of voting shares. 
C) 20% ownership of voting shares. 
D) 10% ownership of voting shares. 
A) 50% ownership of voting shares. 
B) 5% ownership of voting shares. 
C) 20% ownership of voting shares. 
D) 10% ownership of voting shares.

Question 10

How is Goodwill resulting from business combinations treated under Japanese GAAP?

Accepted Answer

A) It is capitalized and amortized over a period of no more than 40 years. 
B) It is allowed to be expensed in the year the subsidiary is acquired. 
C) It is capitalized and written down when its fair value becomes less than its carrying value. 
D) It is amortized over between 5 and 40 years. 
A) It is capitalized and amortized over a period of no more than 40 years. 
B) It is allowed to be expensed in the year the subsidiary is acquired. 
C) It is capitalized and written down when its fair value becomes less than its carrying value. 
D) It is amortized over between 5 and 40 years.

Question 11

In January 2003, the FASB released Interpretation 46, "Consolidation of Variable Interest Entities," which:

Accepted Answer

A) re-emphasized the need for 50% stock ownership to exert effective control. 
B) expanded U.S.GAAP to consider effective control rather than legal control for consolidated financial statements. 
C) took a "form-over-substance" approach to define control in determining requirements for consolidated financial statements. 
D) defined effective control as ownership of 30% or more of another entity's voting shares. 
A) re-emphasized the need for 50% stock ownership to exert effective control. 
B) expanded U.S.GAAP to consider effective control rather than legal control for consolidated financial statements. 
C) took a "form-over-substance" approach to define control in determining requirements for consolidated financial statements. 
D) defined effective control as ownership of 30% or more of another entity's voting shares.

Question 12

Which method of accounting for changing prices (inflation) updates assets by applying inflation rates to historical costs?

Accepted Answer

A) Current replacement cost method 
B) Current rate method 
C) Temporal method 
D) General purchasing power method 
A) Current replacement cost method 
B) Current rate method 
C) Temporal method 
D) General purchasing power method

Question 13

Which of the following is a difference that exists between IFRS 8 and U.S.GAAP?

Accepted Answer

A) There are no differences as the two pronouncements represent total convergence in segment reporting. 
B) U.S.GAAP says that segment assets must be 5% or greater of the total combined assets to be separately disclosed. 
C) U.S.GAAP does not require reporting of segment liabilities. 
D) U.S.GAAP explicitly includes intangibles in the definition of long-lived assets for geographic disclosures. 
A) There are no differences as the two pronouncements represent total convergence in segment reporting. 
B) U.S.GAAP says that segment assets must be 5% or greater of the total combined assets to be separately disclosed. 
C) U.S.GAAP does not require reporting of segment liabilities. 
D) U.S.GAAP explicitly includes intangibles in the definition of long-lived assets for geographic disclosures.

Question 14

Mega Corporation acquired 65% of the voting shares of Forko Ltd.Mega consolidated its accounts by restating assets and liabilities of the subsidiary at fair value on the date the shares were acquired.Which of the following methods for accounting for the business combination is being used by Mega Corporation?

Accepted Answer

A) Purchase method 
B) Fair value method 
C) Pooling method 
D) Current replacement cost method 
A) Purchase method 
B) Fair value method 
C) Pooling method 
D) Current replacement cost method

Question 15

Under general purchasing power accounting, how is the gain or loss in purchasing power reported?

Accepted Answer

A) As a prior period adjustment to Retained Earnings 
B) As an element of accumulated comprehensive income on the Balance Sheet 
C) As an element of income in the current year 
D) All of the above methods are acceptable 
A) As a prior period adjustment to Retained Earnings 
B) As an element of accumulated comprehensive income on the Balance Sheet 
C) As an element of income in the current year 
D) All of the above methods are acceptable

Question 16

Since 2001, which method of accounting for a business combination is required under U.S.GAAP?

Accepted Answer

A) Pooling of interest method 
B) Purchase method 
C) Both purchase and pooling of interest methods are allowed 
D) Purchase is required for transnational combinations, but pooling is allowed for domestic combinations. 
A) Pooling of interest method 
B) Purchase method 
C) Both purchase and pooling of interest methods are allowed 
D) Purchase is required for transnational combinations, but pooling is allowed for domestic combinations.

Question 17

As per IFRS 11, which of the following statements is true of the joint arrangement?

Accepted Answer

A) IFRS 11 is silent about joint arrangements. 
B) In regard to joint venture accounting, IFRS 11 is quite different from U.S.GAAP. 
C) IFRS 11 does not allow revaluation of assets. 
D) A joint arrangement is either a joint operation or a joint venture. 
A) IFRS 11 is silent about joint arrangements. 
B) In regard to joint venture accounting, IFRS 11 is quite different from U.S.GAAP. 
C) IFRS 11 does not allow revaluation of assets. 
D) A joint arrangement is either a joint operation or a joint venture.

Question 18

What does it mean to say that the inflation rate last year was 5%?

Accepted Answer

A) All prices are 5% less at the end of the year than they were at the beginning of the year. 
B) The price of specific products increased 5% between the beginning and the end of the year. 
C) On average, a typical basket of goods costs 5% more at the end of the year than it did at the beginning of the year. 
D) The general purchasing power of the dollar has increased 5% between the beginning of the year and the end of the year. 
A) All prices are 5% less at the end of the year than they were at the beginning of the year. 
B) The price of specific products increased 5% between the beginning and the end of the year. 
C) On average, a typical basket of goods costs 5% more at the end of the year than it did at the beginning of the year. 
D) The general purchasing power of the dollar has increased 5% between the beginning of the year and the end of the year.

Question 19

Holding monetary liabilities during a period of inflation results in:

Accepted Answer

A) purchasing power gains. 
B) purchasing power losses. 
C) transaction gains. 
D) translation losses. 
A) purchasing power gains. 
B) purchasing power losses. 
C) transaction gains. 
D) translation losses.

Question 20

Canto Ltd, a Spanish corporation, acquired 100% interest in Bevo, Inc., a U.S.corporation for $50,000,000.The net assets of Bevo had a book value of $35,000,000 and a fair value of $56,000,000.How should Canto record the business combination? A. 
$\begin{array}{ll}
\text { Net Assets (Bevo) } & 35,000,000 \
\text { Goodwill } & 15,000,000 \
\text { Cash } &&50,000,000
\end{array}$

B.
$\begin{array}{ll}
\text { Net Assets (Bevo) } &56,000,000 \
\text { Goodwill } & &6,000,000 \
\text { Cash } &&50,000,000
\end{array}$

C.
$\begin{array}{ll}
\text { Net Assets (Bevo) } &50,000,000 \
\text { Cash } &&50,000,000
\end{array}$

D. 
$\begin{array}{ll}
\text { Net Assets (Bevo) } &56,000,000 \
\text { Goodwill } & &6,000,000 \
\text { Cash } &&50,000,000
\end{array}$

Accepted Answer

A) Entry A 
B) Entry B 
C) Entry C 
D) Entry D 
A) Entry A 
B) Entry B 
C) Entry C 
D) Entry D

With regard to convergence of accounting for business combinations between IFRS and U.S.GAAP, the major changes to U.S.GAAP include:

Which of the following statements is true about pooling of interests method of accounting for business combinations?

Which method most closely represents the requirement of IAS 29 for reporting financial statements of companies in hyperinflationary economies?

Which of the following terms is often used to describe the equity method of accounting?

Which method of accounting for inflation is used under U.S.GAAP?

A representative market basket of products cost $250 at the beginning of the year, and the same collection of products costs $280 at the end of the year.What is the annual rate of inflation?

According to IAS 27, how can effective control be achieved without owning more than 50% of another company's voting shares?

IFRS 8 adopts which approach to report segmented financial information?

Under U.S.GAAP and IASB standards, the threshold for determining "significant influence" in an associate enterprise is:

How is Goodwill resulting from business combinations treated under Japanese GAAP?

In January 2003, the FASB released Interpretation 46, "Consolidation of Variable Interest Entities," which:

Which method of accounting for changing prices (inflation) updates assets by applying inflation rates to historical costs?

Which of the following is a difference that exists between IFRS 8 and U.S.GAAP?

Under general purchasing power accounting, how is the gain or loss in purchasing power reported?

Since 2001, which method of accounting for a business combination is required under U.S.GAAP?

As per IFRS 11, which of the following statements is true of the joint arrangement?

What does it mean to say that the inflation rate last year was 5%?

Holding monetary liabilities during a period of inflation results in:

Introduction to International Accounting

Worldwide Accounting Diversity

International Convergence of Financial Reporting

International Financial Reporting Standards: Part I

International Financial Reporting Standards: Part II

Comparative Accounting

Foreign Currency Transactions and Hedging Foreign Exchange Risk

Translation of Foreign Currency Financial Statements

Analysis of Foreign Financial Statements

International Taxation

International Transfer Pricing

Strategic Accounting Issues in Multinational Corporations

Comparative International Auditing and Corporate Governance

International Corporate Social Reporting

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Exam 9: Additional Financial Reporting Issues

With regard to convergence of accounting for business combinations between IFRS and U.S.GAAP, the major changes to U.S.GAAP include:

Which of the following statements is true about pooling of interests method of accounting for business combinations?

Which method most closely represents the requirement of IAS 29 for reporting financial statements of companies in hyperinflationary economies?

Which of the following terms is often used to describe the equity method of accounting?

Which method of accounting for inflation is used under U.S.GAAP?

A representative market basket of products cost $250 at the beginning of the year, and the same collection of products costs $280 at the end of the year.What is the annual rate of inflation?

According to IAS 27, how can effective control be achieved without owning more than 50% of another company's voting shares?

IFRS 8 adopts which approach to report segmented financial information?

Under U.S.GAAP and IASB standards, the threshold for determining "significant influence" in an associate enterprise is:

How is Goodwill resulting from business combinations treated under Japanese GAAP?

In January 2003, the FASB released Interpretation 46, "Consolidation of Variable Interest Entities," which:

Which method of accounting for changing prices (inflation) updates assets by applying inflation rates to historical costs?

Which of the following is a difference that exists between IFRS 8 and U.S.GAAP?

Under general purchasing power accounting, how is the gain or loss in purchasing power reported?

Since 2001, which method of accounting for a business combination is required under U.S.GAAP?

As per IFRS 11, which of the following statements is true of the joint arrangement?

What does it mean to say that the inflation rate last year was 5%?

Holding monetary liabilities during a period of inflation results in:

Introduction to International Accounting

Worldwide Accounting Diversity

International Convergence of Financial Reporting

International Financial Reporting Standards: Part I

International Financial Reporting Standards: Part II

Comparative Accounting

Foreign Currency Transactions and Hedging Foreign Exchange Risk

Translation of Foreign Currency Financial Statements

Analysis of Foreign Financial Statements

International Taxation

International Transfer Pricing

Strategic Accounting Issues in Multinational Corporations

Comparative International Auditing and Corporate Governance

International Corporate Social Reporting

Filters