Question 1

Which of the following statements is true relative to accounting for leases internationally?

Accepted Answer

A)  Operating lease disclosure for IFRS and U.S.GAAP is identical.
B)  Some analysts believe that all leases must be restated as if they were operating leases.
C)  Current rules under IFRS,U.S.GAAP and other national accounting standards require leases to be capitalized under certain circumstances.
D)  U) S.GAAP requires that future minimum lease payment disclosures be made for each of the next ten years and for all years thereafter.E) A) and B)
F) None of the above

Question 2

Which of the following statements is true about convenience translations of financial statements?

Accepted Answer

A)  International Business Machines (IBM) is the only corporation in the U.S.that currently provides convenience translation of its financial statements into a foreign language.
B)  Few U.S.companies translate their financial statements into another language.
C)  Convenience translation means that a company will translate its financial statements into English.
D)  All of the above statements are true.E) B) and D)
F) C) and D)

Question 3

Which of the following statements is NOT true concerning reasons for analyzing foreign financial statements?

Accepted Answer

A)  It is important to determine the financial stability of foreign suppliers.
B)  The stock returns of foreign corporations are nearly perfectly correlated with returns on U.S.stocks.
C)  In a global economy,managers may use foreign competitors as benchmarks for evaluating performance.
D)  Managers should determine the financial health of foreign customers before extending credit.E) B) and C)
F) A) and D)

Question 4

Footnote disclosures in foreign financial statements are particularly helpful in:

Accepted Answer

A)  overcoming differences in statement format among countries.
B)  reconciling statements from one country's GAAP to another country's GAAP.
C)  learning relevant information not required to be presented in the accounts.
D)  all of the aboveE) A) and D)
F) All of the above

Question 5

How can foreign corporations alleviate the accounting diversity problem related to comparing foreign financial statements?

Accepted Answer

A)  presenting multiple sets of financial statements under various GAAP
B)  selecting a widely used set of accounting standards for their financial reporting
C)  providing adequate disclosure in notes to the financial statements to allow analysts to make conversions to another country's GAAP
D)  all of the aboveE) A) and B)
F) None of the above

Question 6

Which of the following is most likely to affect an analyst's ability to make meaningful comparisons of financial statement ratios for companies in different countries?

Accepted Answer

A)  differences in currency
B)  language differences
C)  varying business traditions
D)  mathematical degrees of magnitudeE) A) and B)
F) B) and D)

Question 7

Which of the following is true about the format of financial reports?

Accepted Answer

A)  All multinational corporations report Sales Revenue on their income statements.
B)  Gross margin is a standard line item on income statements throughout the world.
C)  Notes to financial statements may clarify international differences in statement formats.
D)  In all countries,total assets are shown on the left side of the balance sheet and liabilities and owners' equity are shown on the right side.E) A) and B)
F) A) and C)

Question 8

Lack of information about accounting methods used,operating segments,and interim financial results is a problem of:

Accepted Answer

A)  disclosure.
B)  relevance.
C)  comparability.
D)  format.E) A) and D)
F) All of the above

Question 9

Why should financial analysts endorse the adoption of IFRS worldwide?

Accepted Answer

A)  It would eliminate differences in the financial statements of international companies.
B)  It would increase the comparability of financial statements across countries.
C)  It would increase the demand for the services of international financial analysts.
D)  The services of financial analysts would become more valuable to investors.E) C) and D)
F) B) and D)

Question 10

According to European Union directives,how frequently must its publicly traded corporations publish financial reports?

Accepted Answer

A)  annually
B)  semi-annually
C)  quarterly
D)  monthlyE) B) and D)
F) A) and C)

Question 11

Translating foreign financial statements into a convenience language:

Accepted Answer

A)  eliminates all readability problems for a financial analyst.
B)  does not always clarify accounting terminology unique to a particular country.
C)  is easily and inexpensively done when the convenience language is English.
D)  is required for all multinational corporations.E) B) and D)
F) None of the above

Question 12

The Morgan Stanley Dean Witter "Apples to Apples" analysis relies on:

Accepted Answer

A)  converting financial statements to U.S.GAAP to compare international investment opportunities.
B)  identifying the most significant factors affecting stock value and considering the effect of accounting diversity on these factors.
C)  the superiority of U.S.GAAP for determining the true value of international capital investments.
D)  converting all the accounts in foreign financial statements to a common set of accounting standards.E) All of the above
F) C) and D)

Question 13

How should currency translation be done in order to appropriately compare a financial statement presented in Japanese yen to a financial statement presented in Chinese yuan?

Accepted Answer

A)  The temporal method should be used.
B)  The historical exchange rates should be used convert financial statement amounts.
C)  All amounts should be converted at the current exchange rate.
D)  Current year statements should be converted at the current exchange rate and prior year statements should be converted at prior year exchange rate.E) All of the above
F) B) and C)

Question 14

What is an advantage of using ratio analysis in comparing financial statements from different countries?

Accepted Answer

A)  Ratios are expressed as percentages,making currency differences irrelevant to the analysis.
B)  Ratios highlight the holding gains or losses related to currency translation.
C)  Purchasing power gains and losses from currency translation show up clearly in ratio analysis.
D)  Comparing business ratios across countries removes the effect of economic conditions and business culture.E) A) and B)
F) A) and C)

Question 15

On what SEC form must foreign corporations with shares listed on U.S.stock exchanges present a reconciliation of net income and stockholders' equity to U.S.GAAP?

Accepted Answer

A)  Form 1040
B)  Form 10-K
C)  Form 20-F
D)  Form 8-QE) B) and D)
F) C) and D)

Question 16

Which of the following is the major limitation of using EBITDA for analyzing foreign financial statements?

Accepted Answer

A)  It is nearly impossible for most financial analysts to calculate this number.
B)  Few analysts understand what this earnings number represents.
C)  The excluded items may be important factors for evaluation.
D)  It cannot be converted from a foreign currency to a domestic currency.E) A) and C)
F) None of the above

Question 17

What is EDGAR?

Accepted Answer

A)  It is a database provided by the London,England stock exchange that provides financial statement information on U.K.companies.
B)  It is a database created by the U.S.Securities and Exchange Commission that provides reports of all corporations listed on the U.S.stock exchanges.
C)  It is a database of reports filed electronically with the U.S.Securities and Exchange Commission.
D)  It is a database that links users to U.S.company websites much like CAROL does in the U.K.E) All of the above
F) B) and C)

Question 18

British companies whose shares are publicly traded on exchanges in the United Kingdom have how long after year-end to file financial statements with regulators in the U.K.?

Accepted Answer

A)  6 months
B)  90 days
C)  60 days
D)  30 daysE) A) and B)
F) All of the above

Question 19

Evaluating liquidity and solvency to assess a company's ability to meet its obligations is an example of:

Accepted Answer

A)  cash flow analysis
B)  risk analysis
C)  ROI analysis
D)  accounting analysisE) A) and D)
F) B) and C)

Question 20

Which of the following statements is true about convenience translations?

Accepted Answer

A)  Translation eliminates the problems associated with comparing financial statements in the same language.
B)  Convenience translation means that a company converts both the language and the currency of its financial statements for the convenience of potential investors.
C)  Convenience translations require reconciliation to U.S.GAAP,U.S.format,as well as conversion to English.
D)  None of the above statements is true.E) None of the above
F) B) and C)

Exam 10: Analysis of Foreign Financial Statements

Which of the following statements is true about convenience translations?

Correct AnswerverifiedShow Answer

On what SEC form must foreign corporations with shares listed on U.S.stock exchanges present a reconciliation of net income and stockholders' equity to U.S.GAAP?

Correct AnswerverifiedShow Answer

The Morgan Stanley Dean Witter "Apples to Apples" analysis relies on:

Correct AnswerverifiedShow Answer

How can foreign corporations alleviate the accounting diversity problem related to comparing foreign financial statements?

Correct AnswerverifiedShow Answer

Evaluating liquidity and solvency to assess a company's ability to meet its obligations is an example of:

Correct AnswerverifiedShow Answer

Which of the following is most likely to affect an analyst's ability to make meaningful comparisons of financial statement ratios for companies in different countries?

Correct AnswerverifiedShow Answer

Lack of information about accounting methods used,operating segments,and interim financial results is a problem of:

Correct AnswerverifiedShow Answer

Which of the following statements is true relative to accounting for leases internationally?

Correct AnswerverifiedShow Answer

Why should financial analysts endorse the adoption of IFRS worldwide?

Correct AnswerverifiedShow Answer

Which of the following statements is true about convenience translations of financial statements?

Correct AnswerverifiedShow Answer

How should currency translation be done in order to appropriately compare a financial statement presented in Japanese yen to a financial statement presented in Chinese yuan?

Correct AnswerverifiedShow Answer

Footnote disclosures in foreign financial statements are particularly helpful in:

Correct AnswerverifiedShow Answer

What is EDGAR?

Correct AnswerverifiedShow Answer

British companies whose shares are publicly traded on exchanges in the United Kingdom have how long after year-end to file financial statements with regulators in the U.K.?

Correct AnswerverifiedShow Answer

Which of the following is true about the format of financial reports?

Correct AnswerverifiedShow Answer

Which of the following statements is NOT true concerning reasons for analyzing foreign financial statements?

Correct AnswerverifiedShow Answer

What is an advantage of using ratio analysis in comparing financial statements from different countries?

Correct AnswerverifiedShow Answer

Which of the following is the major limitation of using EBITDA for analyzing foreign financial statements?

Correct AnswerverifiedShow Answer

According to European Union directives,how frequently must its publicly traded corporations publish financial reports?

Correct AnswerverifiedShow Answer

Translating foreign financial statements into a convenience language:

Correct AnswerverifiedShow Answer

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