International Accounting Exam 1

Question 1

Main Accounting Issue related to international sales

Answer 1

Currency issues and differences in currency

Question 2

Trade Deficit

Answer 2

when a country is importing more than exporting

Question 3

Pros of Trade Deficit

Answer 3

1. improves standard of living
2. lowers costs
3. Foreign investment in other companies

Question 4

Cons of trade deficit

Answer 4

1. harmful for developing countries
2. job outsourcing
3. foreign ownership
4. Reduction in currency value

Question 5

Foreign Direct Investment

Answer 5

setting up and doing business in another country

Question 6

Pro of FDI

Answer 6

1. increases sales and profits
2. Ability to enter new markets
3. Reduces costs
4. tax incentives

Question 7

Cons of FDI

Answer 7

1. Under foreign control
2. loss of domestic jobs
3. risk of political or economical change

Question 8

Horizontal

Answer 8

expanding through similar Industries

Question 9

Vertical

Answer 9

expanding through the supply chain

Question 10

conglomerate

Answer 10

expanding through investing in a different industry

Question 11

FCPA 4 Elements

Answer 11

1. To make a payment
2. involves a foreign official, politician, or candidate
3. intent to corrupt
4. purpose of influencing a government official

Question 12

Called Up Share Capital (UK)

Answer 12

Common Stock

Question 13

Provisions (UK)

Answer 13

Estimated Liabilities

Question 14

Share Premium account (UK)

Answer 14

APIC

Question 15

Own shares held (UK)

Answer 15

Treasury stock

Question 16

Profit and loss account (UK)

Answer 16

retained earnings

Question 17

Other reserves (UK)

Answer 17

Appropriation of RE

Question 18

Reasons for Accounting Diversity (6)

Answer 18

1. Way of providing (bank v. public)
2. Systems and Taxes
3. legal systems (code vs. common)
4. Political and economic
5. Education and status of profession
6. Inflation

Question 19

Code Law

Answer 19

• Statue of codified law governing the range of activities (“you shall not do this”)
• Usually non english speaking countries

Question 20

Common Law

Answer 20

• statue of law that is interpreted by the courts on a case by case basis
• usually english countries

Question 21

Problems with accounting diversity

Answer 21

1. preparation of consolidated financial statements
2. access to foreign markets
3. comparability of financial statements
4. lack of high quality accounting info

Question 22

harmonization

Answer 22

• process that takes place over time
• combination of all different standards
• common denominator approach
• EU and IASC

Question 23

convergence

Answer 23

• goal and a process
• standards are set by regulators and then the countries follow them
• IASB