,Chapter 01 - Introduction to International Accounting
Chapter 01
Introduction to International Accounting
Multiple Choice Questions
1. Which of the following groups is a supranational organization?
A) United Nations
B) Organization for Economic Cooperation and Development
C) International Federation of Accountants
D) All of the above
Answer: D Level: Easy LO: 1
2. Determination of net present value involves:
A) forecasting future profits and cash flows.
B) discounting future cash flows back to their present value.
C) analysis on an after-tax basis.
D) All of the above
Answer: D Level: Medium LO: 1
3. International accounting can be defined in terms of which the following levels?
A) Supranational organizations
B) Company
C) Country
D) All of the above
Answer: D Level: Easy LO: 1
4. The factor used to convert from one country's currency to another country's currency is
called the:
A) Interest rate.
B) Cost of capital.
C) Exchange rate.
D) Strike price.
Answer: C Level: Easy LO: 2
5. What is the term used to describe the possibility that a foreign currency will decrease in
US $ value over the life of an asset such as Accounts Receivable?
A) foreign exchange translation
B) foreign exchange risk
C) hedging
D) foreign currency options
Answer: B Level: Medium LO: 2
1-1
© 2012 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
,Chapter 01 - Introduction to International Accounting
6. Foreign exchange risk arises when:
A) business transactions are denominated in foreign currencies.
B) sales are made to customers in a foreign country.
C) goods or services are purchased from suppliers in a foreign country.
D) accounting reports are prepared in a foreign currency.
Answer: A Level: Medium LO: 2
7. As used in international accounting, a “hedge” is:
A) a business transaction made to reduce the exposure of foreign exchange risk.
B) the legal barrier between the various divisions of a multinational company.
C) the loss in US $ resulting from a decline in the value of the US $ relative to foreign
currencies.
D) one form of foreign direct investment.
Answer: A Level: Medium LO: 2
8. Purchasing an option to buy foreign currency at a predetermined exchange rate in order to
reduce exchange risk is called:
A) transfer pricing.
B) hedging.
C) translating.
D) cross-listing.
Answer: B Level: Easy LO: 2
9. What term is used to describe the process of reducing foreign exchange risk?
A) international accounting
B) exposure
C) hedging
D) globalization
Answer: C Level: Easy LO: 2
10. The ownership and control of foreign assets such as a manufacturing plant is called:
A) a hedge.
B) foreign direct investment.
C) exposure.
D) derivatives.
Answer: B Level: Easy LO: 3
1-2
© 2012 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
, Chapter 01 - Introduction to International Accounting
11. What is a “greenfield” investment?
A) Farm land held for speculation
B) Foreign direct investment whereby a new facility is constructed abroad
C) Purchasing an existing facility as a foreign direct investment
D) A foreign investment that has been approved by the Environmental Protection
Agency
Answer: B Level: Easy LO: 3
12. Which of the following is an example of a greenfield investment?
A) Nike contracts with a footwear company in China to make athletic shoes.
B) A Chinese oil company buys a U.S. oil company.
C) Toyota, a Japanese automaker, builds an assembly plant in Ohio.
D) Daimler, a German automaker, merges with Chrysler, a U.S. automaker.
Answer: C Level: Medium LO: 3
13. Which of the following is a reason for foreign direct investment?
A) Reduce costs of doing business
B) Protect domestic markets
C) Protect foreign markets
D) All of the above
Answer: D Level: Easy LO: 3
14. A translation adjustment may be necessary when:
A) notes to financial statements are converted from one language to another.
B) foreign currency financial statements are converted to another currency.
C) consolidated financial statements are prepared.
D) hedging foreign currency.
Answer: B Level: Medium LO: 2, 3
15. What is “transfer pricing?”
A) The cost to convert from one country's GAAP to another country's GAAP
B) The value of sales made in a foreign country
C) The method of recording transactions between divisions within the same company
D) The taxes paid on sales in a foreign country
Answer: C Level: Easy LO: 3
1-3
© 2012 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 01
Introduction to International Accounting
Multiple Choice Questions
1. Which of the following groups is a supranational organization?
A) United Nations
B) Organization for Economic Cooperation and Development
C) International Federation of Accountants
D) All of the above
Answer: D Level: Easy LO: 1
2. Determination of net present value involves:
A) forecasting future profits and cash flows.
B) discounting future cash flows back to their present value.
C) analysis on an after-tax basis.
D) All of the above
Answer: D Level: Medium LO: 1
3. International accounting can be defined in terms of which the following levels?
A) Supranational organizations
B) Company
C) Country
D) All of the above
Answer: D Level: Easy LO: 1
4. The factor used to convert from one country's currency to another country's currency is
called the:
A) Interest rate.
B) Cost of capital.
C) Exchange rate.
D) Strike price.
Answer: C Level: Easy LO: 2
5. What is the term used to describe the possibility that a foreign currency will decrease in
US $ value over the life of an asset such as Accounts Receivable?
A) foreign exchange translation
B) foreign exchange risk
C) hedging
D) foreign currency options
Answer: B Level: Medium LO: 2
1-1
© 2012 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
,Chapter 01 - Introduction to International Accounting
6. Foreign exchange risk arises when:
A) business transactions are denominated in foreign currencies.
B) sales are made to customers in a foreign country.
C) goods or services are purchased from suppliers in a foreign country.
D) accounting reports are prepared in a foreign currency.
Answer: A Level: Medium LO: 2
7. As used in international accounting, a “hedge” is:
A) a business transaction made to reduce the exposure of foreign exchange risk.
B) the legal barrier between the various divisions of a multinational company.
C) the loss in US $ resulting from a decline in the value of the US $ relative to foreign
currencies.
D) one form of foreign direct investment.
Answer: A Level: Medium LO: 2
8. Purchasing an option to buy foreign currency at a predetermined exchange rate in order to
reduce exchange risk is called:
A) transfer pricing.
B) hedging.
C) translating.
D) cross-listing.
Answer: B Level: Easy LO: 2
9. What term is used to describe the process of reducing foreign exchange risk?
A) international accounting
B) exposure
C) hedging
D) globalization
Answer: C Level: Easy LO: 2
10. The ownership and control of foreign assets such as a manufacturing plant is called:
A) a hedge.
B) foreign direct investment.
C) exposure.
D) derivatives.
Answer: B Level: Easy LO: 3
1-2
© 2012 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
, Chapter 01 - Introduction to International Accounting
11. What is a “greenfield” investment?
A) Farm land held for speculation
B) Foreign direct investment whereby a new facility is constructed abroad
C) Purchasing an existing facility as a foreign direct investment
D) A foreign investment that has been approved by the Environmental Protection
Agency
Answer: B Level: Easy LO: 3
12. Which of the following is an example of a greenfield investment?
A) Nike contracts with a footwear company in China to make athletic shoes.
B) A Chinese oil company buys a U.S. oil company.
C) Toyota, a Japanese automaker, builds an assembly plant in Ohio.
D) Daimler, a German automaker, merges with Chrysler, a U.S. automaker.
Answer: C Level: Medium LO: 3
13. Which of the following is a reason for foreign direct investment?
A) Reduce costs of doing business
B) Protect domestic markets
C) Protect foreign markets
D) All of the above
Answer: D Level: Easy LO: 3
14. A translation adjustment may be necessary when:
A) notes to financial statements are converted from one language to another.
B) foreign currency financial statements are converted to another currency.
C) consolidated financial statements are prepared.
D) hedging foreign currency.
Answer: B Level: Medium LO: 2, 3
15. What is “transfer pricing?”
A) The cost to convert from one country's GAAP to another country's GAAP
B) The value of sales made in a foreign country
C) The method of recording transactions between divisions within the same company
D) The taxes paid on sales in a foreign country
Answer: C Level: Easy LO: 3
1-3
© 2012 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
