INTERNATIONAL ACCOUNTING CHAPTER
9 STUDY GUIDE 2026 COMPLETE
PRACTICE QUESTIONS AND CORRECT
ANSWERS WITH DETAILED RATIONALES
COMPREHENSIVE IFRS AND GLOBAL
FINANCIAL REPORTING EXAM REVIEW
Which of the following is true about advance pricing agreements
A. They are only granted for intercompany transactions between a U.S.
parent and a foreign subsidiary.
B. They are only granted for intercompany transactions between a foreign
parent and a U.S. corporation.
C. In 2003, the IRS approved several thousand advance pricing agreements
for U.S. taxpayers.
D. None of the above is true. - CORRECT ANSWER -D
Historically, which industry is found most at risk for a transfer pricing
adjustment?
A. Consumer packaged goods
B. Pharmaceuticals
C. Petroleum
D. Manufacturing - CORRECT ANSWER -B
,Worldwide, which type of transfer is most likely to be audited?
A. Rental or lease payment made for use of tangible property
B. Sale of tangible property
C. Intercompany services
D. Exports - CORRECT ANSWER -C
Which is NOT a common risk associated with local authorities' scrutiny of a
company's transfer prices?
A. Potential double taxation
B. Uncertainty as to the group's worldwide tax burden
C. Problems in relationships with local tax authorities
D. Discovery of a tax treaty violation - CORRECT ANSWER -D
For what reason are the transfer prices of imports more closely monitored
worldwide than are exports?
A. Political implications
B. Effect on local job availability
C. Impact on a country's balance of trade
D. All of the above - CORRECT ANSWER -D
The monetary amount used to record intercompany transactions is called:
A. exchange rate.
B. transfer price.
C. conversion rate.
D. incremental cost. - CORRECT ANSWER -B
, What is the term used for intercompany transactions from a parent to a
subsidiary?
A. Horizontal transfer
B. Downstream transfer
C. International transfer
D. None of the above - CORRECT ANSWER -B
What is the term used for intercompany transactions from a subsidiary to a
parent?
A. Upstream transfer
B. Horizontal transfer
C. International transfer
D. None of the above - CORRECT ANSWER -A
What is the primary characteristic of a decentralized organization?
A. Size of divisions
B. Number of divisions
C. Delegation of decision making authority
D. Diversity of foreign operations - CORRECT ANSWER -C
While there are many advantages of decentralization, what is the major
disadvantage of decentralized organizations?
A. Manageability of multiple divisions in both domestic and international
operations
B. Possible conflict between division managers' decisions and goals of the
organization
9 STUDY GUIDE 2026 COMPLETE
PRACTICE QUESTIONS AND CORRECT
ANSWERS WITH DETAILED RATIONALES
COMPREHENSIVE IFRS AND GLOBAL
FINANCIAL REPORTING EXAM REVIEW
Which of the following is true about advance pricing agreements
A. They are only granted for intercompany transactions between a U.S.
parent and a foreign subsidiary.
B. They are only granted for intercompany transactions between a foreign
parent and a U.S. corporation.
C. In 2003, the IRS approved several thousand advance pricing agreements
for U.S. taxpayers.
D. None of the above is true. - CORRECT ANSWER -D
Historically, which industry is found most at risk for a transfer pricing
adjustment?
A. Consumer packaged goods
B. Pharmaceuticals
C. Petroleum
D. Manufacturing - CORRECT ANSWER -B
,Worldwide, which type of transfer is most likely to be audited?
A. Rental or lease payment made for use of tangible property
B. Sale of tangible property
C. Intercompany services
D. Exports - CORRECT ANSWER -C
Which is NOT a common risk associated with local authorities' scrutiny of a
company's transfer prices?
A. Potential double taxation
B. Uncertainty as to the group's worldwide tax burden
C. Problems in relationships with local tax authorities
D. Discovery of a tax treaty violation - CORRECT ANSWER -D
For what reason are the transfer prices of imports more closely monitored
worldwide than are exports?
A. Political implications
B. Effect on local job availability
C. Impact on a country's balance of trade
D. All of the above - CORRECT ANSWER -D
The monetary amount used to record intercompany transactions is called:
A. exchange rate.
B. transfer price.
C. conversion rate.
D. incremental cost. - CORRECT ANSWER -B
, What is the term used for intercompany transactions from a parent to a
subsidiary?
A. Horizontal transfer
B. Downstream transfer
C. International transfer
D. None of the above - CORRECT ANSWER -B
What is the term used for intercompany transactions from a subsidiary to a
parent?
A. Upstream transfer
B. Horizontal transfer
C. International transfer
D. None of the above - CORRECT ANSWER -A
What is the primary characteristic of a decentralized organization?
A. Size of divisions
B. Number of divisions
C. Delegation of decision making authority
D. Diversity of foreign operations - CORRECT ANSWER -C
While there are many advantages of decentralization, what is the major
disadvantage of decentralized organizations?
A. Manageability of multiple divisions in both domestic and international
operations
B. Possible conflict between division managers' decisions and goals of the
organization
