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Intl Accounting test 3 chapters 4 and 5




Question;CHAPTER 4?QUESTIONS;TRUE/FALSE;1. With the GPLA model, the adjustment;factor for non-monetary items is comprised of two CPI numbers, the numerator of;which is always the CPI at the financial statement date.;2. The denominator of the adjustment factor for;non-monetary items under the GPLA model is always the average CI for the period;since revenues and expenses typically occur throughout the period.;3. Holding monetary liabilities results in;monetary gain.;4. Under the physical asset approach;employed by the Current Cost-Adjusted model, money is deemed to have inherent;value.;5. The main weakness of the CCA model is;that determining current costs for certain types of fixed assets can be highly;subjective.;6. Corporations in equity-oriented capital;markets are in favor of the CCA model because it tends to overstate reported;earnings.;7. Factors leading to the importance of;accounting for intangible assets include the dramatic increase in mergers and;acquisitions.;8. Goodwill is generally considered to be;the excess of the value of an ongoing business over the value of its net;assets.;9. Negative goodwill occurs when the fair;value of a company?s identifiable net assets is less than the company?s;purchase price.;10. Under the new geographic segment reporting;standards, as set forth by the FAST/AcSB and the IASC/IASB, financial statement;users will likely receive the level of disaggregated geographic segment;information that they consider essential for their investment decisions.;MULTIPLE CHOICE;1. Annual inflation of just five percent;over 15 years would result in prices;a.;doubling;b.;tripling;c.;increasing by five percent;d.;increasing by 75 percent;2. As one of the two main inflation-adjusted;accounting models, the General Price Level Adjusted model;a.;uses price indexes to adjust;for general changes in the purchasing power of the country?s monetary unit;b.;takes a physical asset;perspective to measuring performance and financial position.;c.;Records expenses based on;current replacement cost rather than on historical costs;d.;b. and c.;3. The Current Cost-Adjusted;inflation-adjusted accounting model;a. uses price indexes to adjust for general changes;in the purchasing power of the country?s monetary unit;b.;takes a physical asset;perspective to measuring performance and financial position;c.;records expenses based on;current replacement cost rather than on historical costs;d.;b. and c.;4. The GPLA model;a.;takes into consideration;specific price changes of assets;b.;takes into consideration that;companies are affected differently by inflation depending on their product line;c.;paints all entities with the;same broad brush of general levels of inflation;d.;considers the specific price;changes in the fixed assets, inventories and other physical assets owned by the;company;5. All of the following accounting methods;take a monetary approach to measuring income and wealth, except;a.;the Conventional Historical;Cost model;b.;the Discounted Cash Flow model;c.;the Current Cost-Adjusted model;d.;the General Price Level;Adjusted model;6. Unrealized holding gains and losses;occur;a.;when the physical asset has;been consumed;b.;when the physical assets owned;by a business at year end have changed in value from the historical cost at;which they were originally acquired.;c.;when the physical asset has;been sold for a loss;d.;when a depreciation expense is;recognized;7. Negative goodwill could result from;a.;a bargain purchase of the;company?s assets;b.;a negative image among;consumers or investors of the company?s management;c.;a purchase price in excess of;the company?s value;d.;a. and b.;8. Opponents of goodwill amortization argue;that;a.;goodwill purchased at the time;of acquisition has a finite life and will erode over time as conditions change;b.;the purchased goodwill is;replaced by internally generated goodwill that does not meet recognition;criteria and, therefore, does not belong in the balance sheet;c.;there is no clear measure of;its decline or of the appropriate period of amortization;d.;all of the above;9. In the United States, the amortization of;goodwill has been required since;a.;2001;b.;1945;c.;1970;d.;none of the above;10. The growing demand for environmental;disclosure is attributed to;a.;unified approach to;environmental disclosure among industrialized nations;b.;lack of high-profile;environmental disasters has led to relatively easy reporting;c.;increasing public concern over;environmental issues;d.;an attempt to please the;environmentalist.;CHAPTER 5?QUESTIONS;TRUE/FALSE;1.;Reconciliation to a foreign;country?s GAAP are prepared in response to regulation of a country where the;securities are listed.;2.;In a tax convenience statement;the annual report is prepared in the foreign language and currency of the;preparer?s country.;3.;Limited restatements provide;supplementary disclosures to reconcile selected financial statements from the;company?s domestic accounting standards to the user?s GAAP.;4.;A universal secondary statement;is prepared in the standards of a particular country.;5.;According to the Choi and;Levich study, non-U.S. firms had to incur greater costs for entering U.S.;capital markets than did U.S. firms entering non-U.S. markets.;6.;Responses of preparers to;non-domestic users of their financial statements are a result of cost-benefit;analysis.;7.;In an international financial;statement analysis, for investors to make a relevant comparison of firms in;different countries, investors are better off using the impairment approach;with respect to goodwill in the analysis.;8.;In comparing companies from;different countries, a financial ratio analysis alone provides a relevant;comparison.;9.;The term ?cash and cash;equivalents? is one term that has the same definition in the accounting;principles of different countries.;10.;In order to conduct a sensible;comparison of firms globally, investors must adjust financial statements to;include the cost of health care and pensions without deferrals and treat the;companies? net obligations as debt.;MULTIPLE CHOICE;1. In a convenience translation;a.;the tax preparer translates the;language of the annual report to that of the user?s country;b.;the tax preparer does not translate;the language of the annual report to the user?s country;c.;the currency principles are;those of the user?s country and the accounting principles are those of the;preparer?s country;d.;the currency and accounting;principles are those of the user?s country;2. A secondary statement;a.;translates the company?s;home-country annual report into the foreign user?s language, currency and;accounting principles;b.;are provided when there is;sizeable investor interest in the company;c.;both a. and b.;d.;none of the above;3. According;to the Choi and Levich study, firms in the following countries are relatively;less affected by international accounting diversity;a.;the United States and Japan;b.;Japan and the United Kingdom;c.;the United States and the;United Kingdom;d.;the United States and Germany;4. According to the Choi and Levich study;the following users of financial statements found international accounting;diversity to be a problem;a. underwriters;b. institutional;investors;c. market;regulators;d. all of the;above;5. According to the Morgan Stanley Dean;Witter reports, the following accounting issues need the most attention in;conducting comparisons of firms in different countries;a. depreciation;b. foreign;exchange;c. consolidation;and group reporting;d. all of the;above;6. It is generally easier to obtain annual;reports and from companies;a. purely;domestic companies in debt-oriented economies;b. in;equity-oriented economies;c. multinational;companies with the need for investors abroad;d. both a. and c.;7. Variables affecting the overall quality;of financial statements for individual companies include;a. the integrity;of corporate management;b. the financial;position of the company;c. the attest;value of its auditors;d. all of the;above;8. At a minimum. individual investors making;decisions based on foreign financial statements should keep in mind the;following national characteristics;a. the scope of;audit;b. the general;level of enforcement of capital market regulations in the country;c. both a. and b.;d. none of the;above;9. Which is the most typical timeframe for;countries worldwide to publish their annual reports after year end;a. 30-60 days;b. 61-90 days;c. 91-120 days;d. 121-150 days;10. The following help to explain lower;profitability ratios in Japan than the United States;a. Japanese;companies often do business in competitive export markets;b. Japan has a;debt-oriented economy;c. sales growth;and achievement rather than short-term profits and stock market gains are more;important variables in the performance evaluation of Japanese managers.;d. all of the;above;Problems;="standard">="standard">


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