Question: How do differences in cultural values across

> Marshall Tool and Die Company has been experiencing significant foreign competition and a declining market. Annual net losses from operations have averaged $250,000 over the last three years. The company’s balance sheet as of December 3

> A partially completed statement of realization and liquidation is as follows: The following additional transactions have occurred through August 12 of the current year: a. Receivables collected amounted to $39,000. Receivables with a book value of $15,

> Casper Blueprinting, Inc., has filed under Chapter 7 of the Bankruptcy Code. The estimated net realizable value of its assets is as follows: Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. $ 23,

> A major cattle feeding operation has entered into a firm commitment to buy 100,000 bushels of corn to be delivered to its feed lot in Kansas. The corn is expected to be delivered in 90 days. The company is committed to pay $1.50 per bushel. If corn yield

> Peltzer Manufacturing is experiencing financial difficulties. Rather than entering into a lengthy bankruptcy proceeding, the company has reached an agreement with its long-term creditors to restructure various loans. The restructured loans are described

> Howard Manufacturing has two debts outstanding with a creditor. Howard is experiencing financial difficulties, and the creditor has granted a concession. Therefore, accounting for the debt in question qualifies as a troubled debt restructuring. At the da

> Ridgeway Builders, Inc., is in the residential construction industry and has been experiencing a business downturn. As a result of these economic conditions, the company is having difficulty serving its outstanding debt and is seeking relief outside of t

> Barber Technologies designs and develops software to be used for the management of inventory by both retailers and manufacturing firms. Over the past three years, the company has experienced significant competition and a declining market resulting in a s

> Frankton Corporation has experienced difficult financial times for the past five years resulting in serious cash flow problems, negative earnings, and increasing deficits in retained earnings. The negative cash flows from operations have been managed in

> Cutler Manufacturing manufactures and distributes specialty piping used in the construction industry. Due to the recent contraction in the commercial construction market, the company has had difficulty servicing its outstanding debt. In particular, debt

> Jason Jackson was killed in a mountain-climbing accident in British Columbia. As Jason’s trusted friend and CPA, you have been named executor of his estate and guardian to his minor child, Cody Jackson. Jason’s estate consists of the following assets sub

> Jack Mason is a single parent with three minor children. His will provides for the creation of a trust for the benefit of his three children. His entire net estate is to be placed into the trust, and the trustee is authorized to approve disbursements to

> Edith Leppert and her husband, Gerald Leppert, have net assets with market values of $4,300,000 and $2,400,000, respectively. The Lepperts have begun to do some estate tax planning and are developing various strategies based on the following assumptions:

> Charles Kamp, a divorced person, died in February of the current year with an estate consisting of assets valued at $7,008,000 and liabilities of $380,000. Charles’s will have contained the following provisions: a. Robert Sullivan would serve as executor

> On July 1, 2016, Hargrove Corporation issued a 2-year note with a face value of $4,000,000 and a fixed interest rate of 9%, payable on a semiannual basis. On January 15, 2017, the company entered into an interest rate swap with a financial institution in

> One of your clients has recently read about the goal of converging to International Accounting Standards and they are concerned about what impact it may have on their company. 1. Discuss some of the costs that a company might incur as part of its converg

> Sometimes an MNC may decide to use local currency to evaluate a foreign subsidiary. Required: Explain the circumstances under which it may be appropriate for an MNC to use local currency to evaluate a foreign subsidiary.

> It is impossible to separate the performance of a foreign subsidiary from that of its managers, and there is no need for it. Required: Critically comment on the preceding statement.

> There is no agreement internationally on how to address the issue of auditor liability. Required: Describe the approach taken in your own country in addressing the issue of auditor liability, and explain the rationale behind that approach.

> This chapter refers to the concept of accounting infrastructure, which encompasses the various environmental factors affecting the issues concerning auditing in a particular country. Required: Explain the environmental factors that affect the issues con

> Identify five key terms used in assessing the impact of climate change on a firm.

> Exhibit 15.10 provides an example of a company, Toyota, which has clearly stated its CSR policy in its annual report of 2010. Required: Identify another company which has stated its CSR policy in its 2012 annual report, and compare the main points highl

> The concept of the balanced scorecard is becoming increasingly popular among firms internationally. Required: Explain the possible reasons for the popularity of the balanced scorecard.

> Exhibit 15.7 provides an extract from the 2009 CSR report of a company in the IT industry, IBM Corporation. Required: Discuss the motivations for a company in another industry of your choice to prepare a CSR report, and identify the nature of the inform

> Exhibit 15.4 provides an example of an audit report of a Brazilian company for 2011, which refers to GRI-G3 sustainability guidelines. Required: Identify a 2012 audit report for a U.S. company which refers to GRI-G3 sustainability guidelines and compare

> The Corporate Responsibility Report 2010 of Coca-Cola Amatil Company is at http://ccamatil.com/InvestorRelations/AnnualReports/2009/2010%20 Sustainability%20Report.pdf. It mentions four global pillars. Required: Discuss the strategies, programs, and tar

> Following is the report of the Supervisory Board included in Daimler company’s 2009 Annual Report. REPORT OF THE SUPERVISORY BOARD Dear Shareholders, In eight meetings during the 2009 financial year, the Supervisory Board diligently fulfilled its duties

> Following is the corporate governance report of Honda Motor Company included in its 2009 Annual Report. 1. Basic Stance Regarding Corporate Governance Based on its fundamental corporate philosophy, the Company is working to enhance corporate governance a

> What is the PCAOB? What is its role in audit regulation?

> What is audit quality? What determines audit quality in a given country?

> What determines the primary role of external auditing in a particular country?

> What are the provisions in the Sarbanes-Oxley Act 2002 and the New York Stock Exchange listing requirements that are aimed at improving corporate governance and are directly related to audit committees?

> What are the main differences between the OECD Principles of Corporate Governance issued in 1999 and the revised version issued in 2004?

> According to Exhibit 13.8 , the top-three budget goals for divisional managers of Japanese companies are sales volume, net profit, and production cost, in that order, whereas those of U.S. companies are return on investment, controllable profit, and net

> What is the oversight role of an audit committee?

> What are the main factors that complicate the issue of auditor independence?

> What are some of the strategies adopted internationally to limit the auditor’s liability?

> What determines whether or not to issue an unqualified audit opinion on the compliance of a set of financial statements with IFRS?

> What are the main benefits of international harmonization of auditing standards?

> Why should MNCs be concerned about auditing issues?

> What are the problems caused by inflation in evaluating the performance of a foreign subsidiary?

> What issues are associated with the calculation of profit for a foreign subsidiary?

> Do you think it is important to separate the evaluation of the performance of a subsidiary from that of its manager? Why?

> What are the factors that influence the decision regarding the manner in which a particular subsidiary should be treated for purposes of performance evaluation (e.g., as a cost center or a profit center or an investment center)?

> Visit the Web site of Nokia Company (www.Nokia.com). Required: Comment on Nokia’s risk management activities as reported in the company’s 2009 annual report.

> What are the nonfinancial measures available to MNCs for evaluating foreign subsidiary performance?

> What differences can you identify between performance evaluation measures adopted by Japanese and U.S. MNCs?

> What are the main issues that need to be considered in designing and implementing a successful performance evaluation system for a foreign subsidiary?

> Explain the role of accounting in implementing multinational business strategy

> How does the organizational structure of an MNC influence its strategy implementation?

> Compare and contrast NPV and IRR as capital budgeting techniques.

> Explain the role of accounting in strategy formulation within an MNC.

> What are the external factors that influence strategy formulation within an MNC?

> What are the internal factors that influence strategy formulation within an MNC?

> Sedona Electronics of Arizona exports 25,000 Disc Drive Controllers (DDCs) per year to China under an agreement that covers the period 2009–2013. In China, the DDCs are sold for the RMB (Chinese currency) equivalent of $50 per unit. The total costs in th

> What are some of the problems of trying to regulate CSR practices through legislation?

> Identify five mechanisms for regulating CSR practices at the international level.

> Why is it necessary to regulate the CSR practices of firms?

> What are the implications of climate change for CSR?

> What motivates firms to engage in CSR practices?

> What is the conceptual basis for CSR?

> What are the theories often used to explain the CSR practices of firms?

> What is the Global Reporting Initiative?

> What is the Kyoto Protocol?

> What are the items often included in CSR reports?

> There is no clear definition of corporate social reporting (CSR). The European Commission defines CSR as “the responsibility of enterprises for their impacts on society.” In the United States, there is no governmental regulation regarding CSR. Companies

> What is corporate social reporting (CSR)?

> In what ways do company audit reports vary in different countries?

> What was the impact of the European Union’s Eighth Directive on the regulation of auditing in the United Kingdom?

> What is the PIOB? What is its role in audit regulation?

> On January 1, 2009, a U.S. firm made an investment in Germany that will generate $5 million annually in depreciation, converted at the current spot rate. Projected annual rates of inflation in Germany and in the United States are 5 percent and 2 percent,

> Refer to Exhibit 13.6. Required: Briefly explain the operating environment of a developing country of your choice using the framework that identifies the social, political, economic, and technological influences. Exhibit 13.6:

> A U.S. company is considering an investment project proposal to extend its operations in Germany. As part of the proposed project, the German operation is required to pay an annual royalty of €500,000 to the parent company. Required: Explain the cash fl

> The establishment of the Public Company Accounting Oversight Board (PCAOB) in 2002 was a major step toward strengthening the auditing function in the United States. Required: What can the PCAOB do to strengthen the auditing function in the United States

> This chapter refers to a unique ownership structure of many former state owned enterprises in China, which have been redefined to create new economic entities. Required: Describe the uniqueness of the ownership structure of the entities mentioned above,

> Some commentators argue that the two-tiered corporate structure, with a management board and a supervisory board, prevalent in many Continental European countries, is better suited for addressing corporate governance issues, including the issue of audito

> We’re in the business of satisfying thirst. We do it very well. We’re also thirsty ourselves. Thirsty for continued profitable growth. Every gain delivers more for our shareholders. We’re thirsty for

> Internationally, legislators and professional bodies have focused on corporate governance issues in making recommendations for restoring investor confidence, and auditing is an essential part of corporate governance. Required: Explain the link between a

> In June 2004, the IFAC Ethics Committee issued its “Revision to Paragraph 8.151 Code of Ethics for Professional Accountants.” Accordingly, for the audit of listed entities, a. The lead engagement partner should be rotated after a predefined period, norma

> In June 2003, IFAC issued an IAPS providing additional guidance for auditors internationally when they express an opinion on financial statements that are asserted by management to be prepared in either of the following ways: • Solely in accordance with

> ISA 700 describes three types of audit opinions that can be expressed by the auditor when an unqualified opinion is not appropriate: qualified, adverse, and disclaimer of opinion. Required: What are the circumstances under which each of the above three

> The responsibility for harmonizing auditing standards across countries rests with IFAC. Required: Comment on some of the problems faced by IFAC in achieving the above goal.

> In Anglo-Saxon countries, mechanisms are put in place to regulate auditors within the framework of professional self-regulation, whereas in many Continental European countries, quasi-governmental agencies play a major role in this area. Required: a. Bri

> The UK Corporate Governance Code takes the “comply or explain” approach. Required: a. Describe the main features of the comply or explain approach to corporate governance. b. Why do you think this approach seems to be popular internationally?

> Refer to the Report of Independent Auditors of Unilever N. V. and Unilever PLC, signed on 5 March 2013 (see the appendix to this chapter). Required: Identify the features in the above audit report that are unique to an MNC.

> Globalization has made cultural values irrelevant as a factor influencing multinational business and accounting. Required: State whether or not you agree with the preceding statement, and develop an argument to support the position you have taken.

> Developing a global business strategy for an MNC is a highly complex task. Required: Briefly discuss the complexities referred to in the preceding statement.

> Late in 2009, Canyon Power Company (CPC) management was considering expansion of the company’s international business activities. CPC is an Arizona-based manufacturer of specialist electric motors for use in industrial equipment. All of

> Company R purchases a 25% interest in Company E on January 1, 2014, at its book value of $20,000. From 2014 through 2018, Company E earns a total of $200,000. From 2019 through 2023, it loses $300,000. In 2024, Company E reports net income of $30,000. Wh

> Company E reports net income of $100,000 for 2015. Assume the income is earned evenly throughout the year. Dividends of $10,000 are paid on December 31. What will Company R report as investment income under the following ownership situations, if: a. Comp

> Assume the same facts as for Question 1 above. The fair value of the investment in Company E is $220,000 on December 31, 2015. Answer the following questions assuming the investment is recorded using the fair value option: a. What is Company R’s investme

> Company P has internally generated net income of $250,000 (excludes share of subsidiary income). Company P has 100,000 shares of outstanding common stock. Subsidiary Company S has a net income of $60,000 and 40,000 shares of outstanding common stock. Wha

> On January 1, 2015, Company P sold a machine to its 70%-owned subsidiary, Company S, for $60,000. The book value of the machine was $50,000. The machine was depreciated using the straight-line method over five years. On December 31, 2017, Company S sold

> On January 1, 2016, Peanut Corporation acquires an 80% interest in Sunny Corporation. Information regarding the income and equity structure of the two companies as of the year ended December 31, 2018, is as follows: Additional information is as follo

> Company S is 80% owned by Company P. Near the end of 2015, Company S sold merchandise with a cost of $6,000 to Company P for $7,000. Company P sold the merchandise to a nonaffiliated firm in 2016 for $10,000. How much total profit should be recorded on t

> Par Company acquires 100% of the common stock of Sub Company for an agreedupon price of $900,000. The book value of the net assets is $700,000, which includes $50,000 of subsidiary cash equivalents. Existing fixed assets have fair values greater than the

> A primary beneficiary company has established control over a VIE by guaranteeing its long term debt and by establishing an income distribution contract. The balance sheet of the VIE on the acquisition date was as follows: The fair values of the land an

> Company P has internally generated net income of $200,000 (excludes share of subsidiary income). Company P has 100,000 shares of outstanding common stock. Subsidiary Company S has a net income of $60,000 and 40,000 shares of outstanding common stock. Com

> P Company acquires 80% of the common stock of S Company for an agreed-upon price of $640,000. The fair value of the NCI is $160,000. The book value of the net assets is $600,000, which includes $50,000 of subsidiary cash equivalents. Any excess is attrib

> What will be the effect of the above acquisition on cash flow statements prepared in periods after the year of the purchase?