Worldwide Accounting Diversity and International Accounting Standards

[QUESTION]

1.  In the United States, foreign companies filing annual reports with the SEC that are notprepared in accordance with U.S. GAAP must:

A) Present financial statements that comply with international GAAP.

B) Conform with U.S. GAAP or present a reconciliation to U.S. GAAP.

C) Have a demonstrated need for capital to be used for operations in the U.S.

D) Use the U.S. dollar as their reporting currency.

E) Either use IFRS, or otherwise use foreign GAAP with a reconciliation to U.S. GAAP.

Answer:E

Learning Objective: 11-07

Topic: SEC recognition of IFRS

Difficulty: 1 Easy

Blooms: Understand

AACSB: Thinking

AACSB: Diversity

AICPA: BB Global

AICPA: FN Measurement

[QUESTION]

2.  Which of the following is nota likely step to furthering convergence of FASB and IFRS?

A) FASB adopting an existing IASB Standard.

B) IASB adopting an existing FASB standard.

C) FASB and IASB issuing an identical standard.

D) FASB working with IASB to develop a new standard.

E) Realizing that identical standards, rather than similar standards, is not realistic.

Answer: C

Learning Objective: 11-07

Topic: FASB–IASB Convergence process

Difficulty: 2 Medium

Blooms: Remember

AACSB: Reflective Thinking

AACSB: Diversity

AICPA: BB Global

AICPA: BB Legal

[QUESTION]

3. All of the following are influences on the development of a country’s financial reporting practices except:

A) The country’s legal system.

B) The country’s political system.

C) The taxation system.

D) The country’s cultural system.

E) The country’s level of inflation.

Answer:D

Learning Objective: 11-01

Topic: Accounting diversity―Factors of influence

Difficulty: 2 Medium

Blooms: Remember

AACSB: Reflective Thinking

AACSB: Diversity

AICPA: BB Global

AICPA: BB Legal

[QUESTION]

4.  Which of the following is a pronouncement originally issued by the IASC and is nota pronouncement originally issued by the IASB?

A) Business Combinations.

B) First-Time Adoption of IFRS.

C) Financial Instruments: Disclosures.

D) Interim Financial Reporting.

E) Operating Segments.

Answer:D

Learning Objective: 11-03

Topic: IFRS―Types of pronouncements

Difficulty: 3 Hard

Blooms: Remember

AACSB: Reflective Thinking

AICPA: BB Global

AACSB: Diversity

AICPA: FN Research

[QUESTION]

5.  In countries of Latin America:

A) Accounting practice currently emphasizes political colonialism.

B) Accounting standards previously emphasized accounting highly inflationary economies.

C) Banks are the primary source of financing for companies.

D) Accounting standards focus are based on recent market economy reforms.

E) Accounting information is prepared to meet the needs of governmental planners.

Answer: B

Learning Objective: 11-01

Topic: Accounting diversity―Factors of influence

Difficulty: 1 Easy

Blooms: Remember

AACSB: Reflective thinking

AACSB: Diversity

AICPA: BB Global

AICPA: BB Legal

[QUESTION]

6.  Which of the following is not a way for a country to use IFRS?

A) Require foreign companies listed on that country’s stock exchange to use IFRS for consolidated financial statements.

B) Allow foreign companies listed on that country’s stock exchange to use IFRS.

C) Permit its domestic companies listed on that country’s stock exchange to use IFRS.

D) Adopt IFRS as that country’s national GAAP.

E) All of these answer choices are correct.

Answer: E

Learning Objective: 11-04

Topic: IFRS―Usage around the world

Difficulty: 2 Medium

Blooms: Remember

AACSB: Reflective Thinking

AACSB: Diversity

AICPA: BB Global

AICPA: BB Legal

[QUESTION]

7.  Convergence of accounting standards would notoccur by:

A) FASB adopting an existing IASB standard.

B) IASB adopting an existing FASB standard.

C) IASB issuing a new standard.

D) IASB and FASB jointly developing a new standard.

E) IASB and FASB each issuing a similar but not identical standard.

Answer:C

Learning Objective: 11-07

Topic: FASB–IASB Convergence process

Difficulty: 2 Medium

Blooms: Remember

AACSB: Reflective Thinking

AACSB: Diversity

AICPA: BB Global

AICPA: FN Research

[QUESTION]

8.  The types of differences that exist between IFRS and U.S. GAAP would notgenerally include:

A) Presentation differences.

B) Measurement differences.

C) Disclosure differences.

D) Comparability differences.

E) Classification differences.

Answer:D

Learning Objective: 11-08

Topic: IFRS–US GAAP differences―Select the type

Difficulty: 1 Easy

Blooms: Remember

AACSB: Reflective Thinking

AACSB: Diversity

AICPA: BB Global

AICPA: FN Measurement

[QUESTION]

9.  Which of the following is not true about IFRS?

A) The IASB does not have the ability to enforce proper usage of IFRS.

B) IFRS is available to any organization or nation that wishes to use those standards.

C) IFRS is a comprehensive set of financial reporting standards.

D) IFRS includes only pronouncements issued by the IASB.

E) IFRS are considered as generally accepted accounting principles.

Answer:D

Learning Objective: 11-03

Topic: IFRS―Types of pronouncements

Difficulty: 2 Medium

Blooms: Remember

AACSB: Reflective Thinking

AICPA: BB Global

AICPA: FN Research

[QUESTION]

10.  Which one of the following isnot a background or qualification requirement for full-time IASB members?

A) Professional competence.

B) Attain 10 years of auditing experience.

C) Practical experience.

D) Cease holding positions which might call into question their independence.

E) Sever relationship with former employers.

Answer: B

Learning Objective: 11-02

Topic: IASC and IASB―Developers of standards

Difficulty: 1 Easy

Blooms: Remember

AACSB: Ethics

AACSB: Diversity

AICPA: BB Global

AICPA: BB Legal

[QUESTION]

11.  Which of the following isnotan authoritative pronouncement of International Financial Reporting Standards (IFRSs)?

A) International Financial Reporting Standards issued by the IASB

B) International Accounting Standards issued by the IASCand adopted by the IASB

C) Interpretations issued by the International Financial Reporting Interpretations Committee (IFRICs)

D) International Accounting Principles

E) Interpretations issued by the Standing Interpretations Committee (SICs) and adopted by the IASB

Answer:D

Learning Objective: 11-03

Topic: IFRS―Types of pronouncements

Difficulty: 2 Medium

Blooms: Remember

AACSB: Reflective Thinking

AACSB: Diversity

AICPA: BB Global

AICPA: FN Research

[QUESTION]

12.  Which of the following is nota factor influencing a country’s financial reporting practices?

A) Providers of financing.

B) Inflation.

C) Legal system.

D) Gross National Product.

E) Political and economic ties.

Answer: D

Learning Objective: 11-01

Topic: Accounting diversity―Factors of influence

Difficulty: 1 Easy

Blooms: Remember

AACSB: Reflective Thinking

AACSB: Diversity

AICPA: BB Global

AICPA: BB Legal

[QUESTION]

13.  Which of the following statements is falseregarding a country’s legal system?

A) The two major types of legal systems are common law and codified Roman law.

B) Common law originated in the Roman jus civile. 

C) Code law countries tend to have more statutes governing a wider range of human activity.

D) Accounting law is rather general in code law countries.

E) A nongovernmental organization is more likely to develop in a common law country than in a code law country.

Answer: B

Learning Objective: 11-01

Topic: Accounting diversity―Factors of influence

Difficulty: 2 Medium

Blooms: Remember

AACSB: Reflective Thinking

AACSB: Diversity

AICPA: BB Global

AICPA: BB Legal

[QUESTION]

14.  The most relevant factor in determining the purpose of financial reporting is:

A) The nature of the country’s financing system

B) The country’s current economic conditions

C) The ability to control inflation

D) A strong equity financing system which is more conservative, minimal disclosures, and tight tax laws.

E) A weak equity financing system which is less conservative, extensive disclosures and loose tax laws.

Answer: A

Learning Objective: 11-01

Topic: Accounting diversity―Factors of influence

Difficulty: 2 Medium

Blooms: Understand

AACSB: Reflective Thinking

AACSB: Diversity

AICPA: BB Global

[QUESTION]

15. Which of the following is nota problem caused by diverse accounting practices across countries?

A) Preparation of consolidated financial statements.

B) Gaining access to foreign capital markets.

C) Lack of comparability of financial statements between companies in the same country.

D) Cost and expertise required of accounting staff who prepare consolidated financial statements.

E) Need for a company to maintain multiple sets of accounting records.

Answer:C

Learning Objective: 11-02

Topic: Accounting diversity―Problems caused

Difficulty: 1 Easy

Blooms: Remember

AACSB: Reflective Thinking

AACSB: Diversity

AICPA: BB Global

[QUESTION]

16.  A U.S. company has many foreign subsidiaries and wants to convert its consolidated financial statements from U.S. GAAP to IFRS.  Which of the following items is notone of the likely accounting issues to resolve for the opening IFRS balance sheet?

A) Inventory valuation.

B) Capitalizing development costs.

C) Bank overdrafts that are integral to cash management.

D) Goodwill calculation from acquisition of a subsidiary.

E) Liability for restructuring charges.

Answer: D

Learning Objective: 11-06

Topic: IFRS―First-time adoption

Difficulty: 2 Medium

Blooms: Understand

AACSB: Reflective Thinking

AACSB: Diversity

AICPA: BB Global

AICPA: FN Measurement

[QUESTION]

17.  A U.S. company has many foreign subsidiaries and is converting its consolidated financial statements from U.S. GAAP to IFRS.  Which of the following items is notone of the likely accounting issues to resolve for the conversion?

A) Measuring impairment.

B) Classifying preferred shares of stock.

C) Sale and leaseback gain recognition.

D) Measuring salaries expense.

E) Prior service cost recognition for defined benefit plans.

Answer:D

Learning Objective: 11-08

Topic: IFRS–US GAAP differences―Specific topics

Difficulty: 2 Medium

Blooms: Understand

AACSB: Reflective Thinking

AACSB: Diversity

AICPA: BB Global

AICPA: FN Measurement

[QUESTION]

18.  Foreign companies whose stock is listed on a U.S. stock exchange and using foreign GAAP other than IFRS must file their annual report with the SEC on:

A) Form 8-A.

B) Form 10-A.

C) Form 16-K.

D) Form 20-F.

E) Form 20-K.

Answer: D

Learning Objective: 11-07

Topic: SEC recognition of IFRS

Difficulty: 1 Easy

Blooms: Remember

AACSB: Reflective Thinking

AACSB: Diversity

AICPA: BB Legal

AICPA: BB Global

[QUESTION]

19.  What international organization currently issuesIFRS?

A) IASB.

B) IASC.

C) IOSCO.

D) FASB.

E) EU.

Answer: A

Learning Objective: 11-03

Topic: IFRS―Types of pronouncements

Difficulty: 1 Easy

Blooms: Remember

AACSB: Legal

AACSB: Diversity

AICPA: BB Global

AICPA: BB Legal

[QUESTION]

20. All of the following are ways a country may use IFRSexcept:

A) A country may require foreign companies listed on its domestic stock exchange to use IFRS.

B) A country may permit companies listed on its domestic stock exchange to use IFRS.

C) A country may permit foreign companies listed on a foreign stock exchange to use foreign GAAP.

D) A country may require companies listed on its domestic stock exchange to use IFRS in preparing consolidated financial statements.

E) A country may adopt IFRS as its national GAAP.

Answer: C

Learning Objective: 11-04

Topic: IFRS―Usage around the world

Difficulty: 1 Easy

Blooms: Remember

AACSB: Reflective Thinking

AACSB: Diversity

AICPA: BB Global

AICPA: BB Legal

[QUESTION]

21. All of the following are true regarding IASB members except:

A) IASB shall comprise 16 members, and up to 3 of those members may be part-time.

B) Full-time members must sever employment relationships with former employers.

C) Full-time members are not allowed to hold any position giving rise to perceived economic incentives that might call their independence into question.

D) Part-time members must sever employment relationships with former employers.

E) Primary qualifications for IASB membership are professional competence and practical experience.

Answer: D

Learning Objective: 11-02

Topic: IASC and IASB―Developers of standards

Difficulty: 1 Easy

Blooms: Remember

AACSB: Ethics

AACSB: Diversity

AICPA: BB Global

[QUESTION]

22.  IFRS for SMEs differ from full IFRS in all of the following ways except:

A) IFRS for SMEs require significantly fewer disclosures.

B) Interim period reports need not be prepared when following IFRS for SMEs.

C) Recognizing and measuring assets are simplified when following IFRS for SMEs.

D) Segment reporting must be provided when following IFRS for SMEs.

E) IFRS for SMEs do not require earnings per share to be reported.

Answer:  D

Learning Objective: 11-05

Topic: IFRS for SMEs

Difficulty: 2 Medium

Blooms: Remember

AACSB: Reflective Thinking

AACSB: Diversity

AICPA: BB Global

AICPA: FN Measurement

[QUESTION]

23. Which of the following is not an example of IFRS simplified for SMEs?

A) All borrowing costs are expensed as incurred.

B) All development costs are expensed as incurred.

C) Goodwill is amortized over its useful life.

D) There is a choice between using the cost model and the revaluation model for property, plant, and equipment.

E) Actuarial gains and losses for defined benefit plans are recognized immediately.

Answer:  D

Learning Objective:  11-05

Topic: IFRS for SMEs

Difficulty: 2 Medium

Blooms: Remember

AACSB: Reflective Thinking

AACSB: Diversity

AICPA: BB Global

AICPA: FN Measurement

24. IFRS for SMEs are primarily designed to meet the needs of:

A) Small Manufacturing Enterprises.

B) Governmental entities.

C) Companies whose shares of stock are not publicly traded.

D) Not-for-profit organizations.

E) Special Model Entities.

Answer: C

Learning Objective:  11-05

Topic: IFRS for SMEs

Difficulty: 1 Easy

Blooms: Remember

AACSB: Reflective Thinking

AACSB: Diversity

AICPA: BB Global

AICPA: BB Legal

AICPA: FN Research

[QUESTION]

25. Which of the following is the organization that governs the IASB?

A) IASC.

B) IOSCO.

C) UNESCO.

D) IFRS Foundation.

E) IAS Service.

Answer: D

Learning Objective: 11-02

Topic: IASC and IASB―Developers of standards

Difficulty: 1 Easy

Blooms: Remember

AACSB: Reflective Thinking

AACSB: Diversity

AICPA: BB Global

AICPA: BB Legal

26. All of the following are simplified principles for recognizing and measuring assets, liabilities, income, and expenses for SMEs under IFRSexcept:

A) Borrowing costs are expensed as incurred.

B) All development costs are expensed as incurred.

C) Actuarial gains and losses for defined benefit plans may be either recognized immediately or deferred and amortized.

D) Goodwill is amortized over its useful life.

E) The cost model for property, plant, and equipment must be used.

Answer: C