Question 1

Discuss why the reporting of disaggregated data may be preferable to consolidated data.

Accepted Answer

Consolidation is a useful way of summarizing overall results as if an affiliated group were one legal entity. But such a method necessarily fails to report on the real separate legal entities, and for this reason there is bound to be a loss of information with respect to the separate legal entities. A number of studies have found that disaggregated data by product line are more useful in forecasting earnings and in valuing the firm.

Question 2

Which of the following is not a true statement regarding SFAS No. 94?

Accepted Answer

A)  SFAS No. 94 rejected the exclusionary arguments of ARB 51 and ARB 43. 
B)  SFAS No. 94 requires all majority-owned companies to be consolidated except when control is only temporary or if the majority owner does not have effective control. 
C)  SFAS No. 94 says that neither legal reorganization nor bankruptcy is an instance of noncontrol by a majority owner. 
D)  There is some evidence that the FASB was attempting to "level the playing field" in SFAS No. 94 by requiring companies to provide more information to financial statement users who might not have been aware of debt levels carried by unconsolidated subsidiaries. 
A)  SFAS No. 94 rejected the exclusionary arguments of ARB 51 and ARB 43. 
B)  SFAS No. 94 requires all majority-owned companies to be consolidated except when control is only temporary or if the majority owner does not have effective control. 
C)  SFAS No. 94 says that neither legal reorganization nor bankruptcy is an instance of noncontrol by a majority owner. 
D)  There is some evidence that the FASB was attempting to "level the playing field" in SFAS No. 94 by requiring companies to provide more information to financial statement users who might not have been aware of debt levels carried by unconsolidated subsidiaries. C

Question 3

Which of the following is not a true statement regarding SFAS No. 8?

Accepted Answer

A)  SFAS was faithful to the historical cost accounting model, but from an economic viewpoint, it produced illogical results. 
B)  SFAS No. 8 required the temporal method of translation. 
C)  In empirical studies made of the economic impact of SFAS No. 8 on American multinational enterprises, only foreign exchange risk and management policies regarding hedging of foreign currency exposures were found to have any possible impact. 
D)  SFAS No. 8 was consistent with the foreign currency orientation. 
A)  SFAS was faithful to the historical cost accounting model, but from an economic viewpoint, it produced illogical results. 
B)  SFAS No. 8 required the temporal method of translation. 
C)  In empirical studies made of the economic impact of SFAS No. 8 on American multinational enterprises, only foreign exchange risk and management policies regarding hedging of foreign currency exposures were found to have any possible impact. 
D)  SFAS No. 8 was consistent with the foreign currency orientation. D

Question 4

A _____ occurs when the subsidiary's stock is distributed to the combinor's shareholders as a dividend.

Accepted Answer

A)  Spin-off 
B)  Split-off 
C)  Split-up 
D)  Sell-off 
A)  Spin-off 
B)  Split-off 
C)  Split-up 
D)  Sell-off

Question 5

Under the temporal method of translation, all balance sheet items that are carried at current or future exchange prices are translated at the current exchange rate, while items carried at past prices are translated at exchange rates existing at the time the item was acquired.

Accepted Answer

A) True 
 B)False

Question 6

A _________ occurs when the subsidiary's shares are distributed to the combinor's shareholders in exchange for shares of the parent's stock.

Accepted Answer

A)  Spin-off 
B)  Split-off 
C)  Split-up 
D)  Sell-off 
A)  Spin-off 
B)  Split-off 
C)  Split-up 
D)  Sell-off

Question 7

SFAS 141 requires acquisitions previously accounted for as poolings be converted to purchase accounting.

Accepted Answer

A) True 
 B)False

Question 8

What is meant by proportionate consolidation, and what are its advantages?

Accepted Answer

Under proportionate consolidation, only

Question 9

Application of the purchase method may be complicated by part of the purchase price being of a noncash nature.

Accepted Answer

A) True 
 B)False

Question 10

SFAS NO. 8 required the temporal method of translation.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following methods of accounting for a business combination assumes that the parent company purchases the subsidiary and must account for the acquisition as it would for the acquisition of any asset.

Accepted Answer

A)  Pooling of interests 
B)  The purchase method 
C)  The new entity approach 
D)  Proportionate consolidation 
A)  Pooling of interests 
B)  The purchase method 
C)  The new entity approach 
D)  Proportionate consolidation

Question 12

In the terminology suggested by the FASB, which of the following terms refers to the accounting entity that results from a business combination?

Accepted Answer

A)  Parent enterprise 
B)  Combined enterprise 
C)  Consolidated enterprise 
D)  Controlling enterprise 
A)  Parent enterprise 
B)  Combined enterprise 
C)  Consolidated enterprise 
D)  Controlling enterprise

Question 13

According to SFAS No. 115, the fair market value method applies for investments of less than 50 percent where market values are readily determinable

Accepted Answer

A) True 
 B)False

Question 14

Which of the following criteria has been most used by standard-setting bodies as the basis for evaluating the level of investor influence?

Accepted Answer

A)  Controlling influence on the board of directors 
B)  Operating control 
C)  Managerial control 
D)  Percentage of voting stock owned 
A)  Controlling influence on the board of directors 
B)  Operating control 
C)  Managerial control 
D)  Percentage of voting stock owned

Question 15

Which of the following is not a true statement regarding SFAS No. 52?

Accepted Answer

A)  The key question brought up in SFAS No. 52 involves how to report exchange gains and losses on the income statement. 
B)  The six guidelines or economic factors provided by SFAS No. 52 for determining the functional currency have a differential cash flow orientation. 
C)  The six indicators provided by SFAS No. 52 have been found to provide adequate guidance for determining the functional currency. 
D)  The six indicators provided by SFAS No. 52 for determining the functional currency have a foreign currency component and a parent's currency component. 
A)  The key question brought up in SFAS No. 52 involves how to report exchange gains and losses on the income statement. 
B)  The six guidelines or economic factors provided by SFAS No. 52 for determining the functional currency have a differential cash flow orientation. 
C)  The six indicators provided by SFAS No. 52 have been found to provide adequate guidance for determining the functional currency. 
D)  The six indicators provided by SFAS No. 52 for determining the functional currency have a foreign currency component and a parent's currency component.

Question 16

In the terminology suggested by the FASB, which of the following terms refers to the separate business enterprises that enter into a business combination?

Accepted Answer

A)  Constituent companies 
B)  Combined companies 
C)  Subsidiary companies 
D)  Consolidated companies 
A)  Constituent companies 
B)  Combined companies 
C)  Subsidiary companies 
D)  Consolidated companies

Question 17

The relevant circumstance in determining the reporting method for nonconsolidated intercorporate equity investments is effective control.

Accepted Answer

A) True 
 B)False

Question 18

The relevant circumstances that justify differential accounting for intercorporate equity investments depend on the level of influence held by the investor.

Accepted Answer

A) True 
 B)False

Question 19

An objective of translation under SFAS No. 52 is to avoid reporting foreign-currency-denominated operations as if they had occurred in U.S. dollars.

Accepted Answer

A) True 
 B)False

Question 20

Accounting exposure is the exposure to exchange gains and losses resulting from translating U.S.-dollar-denominated financial statements into foreign denominations.

Accepted Answer

A) True 
 B)False

Discuss why the reporting of disaggregated data may be preferable to consolidated data.

Which of the following is not a true statement regarding SFAS No. 94?

Which of the following is not a true statement regarding SFAS No. 8?

A _____ occurs when the subsidiary's stock is distributed to the combinor's shareholders as a dividend.

Under the temporal method of translation, all balance sheet items that are carried at current or future exchange prices are translated at the current exchange rate, while items carried at past prices are translated at exchange rates existing at the time the item was acquired.

A _________ occurs when the subsidiary's shares are distributed to the combinor's shareholders in exchange for shares of the parent's stock.

SFAS 141 requires acquisitions previously accounted for as poolings be converted to purchase accounting.

What is meant by proportionate consolidation, and what are its advantages?

Application of the purchase method may be complicated by part of the purchase price being of a noncash nature.

SFAS NO. 8 required the temporal method of translation.

Which of the following methods of accounting for a business combination assumes that the parent company purchases the subsidiary and must account for the acquisition as it would for the acquisition of any asset.

In the terminology suggested by the FASB, which of the following terms refers to the accounting entity that results from a business combination?

According to SFAS No. 115, the fair market value method applies for investments of less than 50 percent where market values are readily determinable

Which of the following criteria has been most used by standard-setting bodies as the basis for evaluating the level of investor influence?

Which of the following is not a true statement regarding SFAS No. 52?

In the terminology suggested by the FASB, which of the following terms refers to the separate business enterprises that enter into a business combination?

The relevant circumstance in determining the reporting method for nonconsolidated intercorporate equity investments is effective control.

The relevant circumstances that justify differential accounting for intercorporate equity investments depend on the level of influence held by the investor.

An objective of translation under SFAS No. 52 is to avoid reporting foreign-currency-denominated operations as if they had occurred in U.S. dollars.

Accounting exposure is the exposure to exchange gains and losses resulting from translating U.S.-dollar-denominated financial statements into foreign denominations.

An Introduction to Accounting Theory

Accounting Theory and Accounting Research

Development of Institutional Structure of Financial Accounting

The Economics of Financial Reporting Regulation

Postulates, Principles, and Concepts

The Search for Objectives

The Fasbs Conceptual Framework

Usefulness of Accounting Information to Investors and Creditors

Uniformity and Disclosure: Some Policy Making Directions

International Accounting

The Balance Sheet

The Income Statement

Statements of Cash Flows

Accounting for Inflation and Changing Prices

Income Taxes and Financial Accounting

Pensions and Other Postretirement Benefits

Leases

Filters

Exam 18: Intercorporate Equity Investments

Discuss why the reporting of disaggregated data may be preferable to consolidated data.

Which of the following is not a true statement regarding SFAS No. 94?

Which of the following is not a true statement regarding SFAS No. 8?

A _____ occurs when the subsidiary's stock is distributed to the combinor's shareholders as a dividend.

Under the temporal method of translation, all balance sheet items that are carried at current or future exchange prices are translated at the current exchange rate, while items carried at past prices are translated at exchange rates existing at the time the item was acquired.

A _________ occurs when the subsidiary's shares are distributed to the combinor's shareholders in exchange for shares of the parent's stock.

SFAS 141 requires acquisitions previously accounted for as poolings be converted to purchase accounting.

What is meant by proportionate consolidation, and what are its advantages?

Application of the purchase method may be complicated by part of the purchase price being of a noncash nature.

SFAS NO. 8 required the temporal method of translation.

Which of the following methods of accounting for a business combination assumes that the parent company purchases the subsidiary and must account for the acquisition as it would for the acquisition of any asset.

In the terminology suggested by the FASB, which of the following terms refers to the accounting entity that results from a business combination?

According to SFAS No. 115, the fair market value method applies for investments of less than 50 percent where market values are readily determinable

Which of the following criteria has been most used by standard-setting bodies as the basis for evaluating the level of investor influence?

Which of the following is not a true statement regarding SFAS No. 52?

In the terminology suggested by the FASB, which of the following terms refers to the separate business enterprises that enter into a business combination?

The relevant circumstance in determining the reporting method for nonconsolidated intercorporate equity investments is effective control.

The relevant circumstances that justify differential accounting for intercorporate equity investments depend on the level of influence held by the investor.

An objective of translation under SFAS No. 52 is to avoid reporting foreign-currency-denominated operations as if they had occurred in U.S. dollars.

Accounting exposure is the exposure to exchange gains and losses resulting from translating U.S.-dollar-denominated financial statements into foreign denominations.

An Introduction to Accounting Theory

Accounting Theory and Accounting Research

Development of Institutional Structure of Financial Accounting

The Economics of Financial Reporting Regulation

Postulates, Principles, and Concepts

The Search for Objectives

The Fasbs Conceptual Framework

Usefulness of Accounting Information to Investors and Creditors

Uniformity and Disclosure: Some Policy Making Directions

International Accounting

The Balance Sheet

The Income Statement

Statements of Cash Flows

Accounting for Inflation and Changing Prices

Income Taxes and Financial Accounting

Pensions and Other Postretirement Benefits

Leases

Filters