Question: The London Stock Exchange (LSE) provides a

> What are the differences in the amount of borrowing costs that can be capitalized under IFRS and U.S. GAAP?

> What is the process for determining whether goodwill allocated to a specific cash-generating unit is impaired?

> How are internally generated intangibles handled under IFRS? How does this differ from U.S. GAAP?

> What are the guidelines on selecting and changing accounting policies?

> What are the three major types of intangible asset, and how does the accounting for them differ?

> How does the classification of interest and dividends in the statement of cash flows differ between IFRS and U.S. GAAP?

> D o you see a major change of emphasis in the harmonization process since the establishment of the IASB? Explain.

> Refer to Exhibit 3.6 in this chapter and note the countries that do not permit domestic listed companies to use IFRS. Required: Identify three countries from this group that are likely to have different reasons for not permitting the use of IFRS by dome

> What is the IASB’s principles-based approach to accounting standard-setting?

> How does the structure of the IASB help to establish its legitimacy as a global standard-setter?

> Why was IOSCO’s endorsement of IASs so important to the IASC’s efforts?

> How has the U.S. SEC policy toward IFRS changed?

> What are the potential benefits that a multinational corporation could derive from the international convergence of accounting standards?

> In what way is the IASB’s Framework intended to assist firms in preparing IFRS-based financial statements?

> Would the worldwide adoption of IFRS result in worldwide comparability of financial statements? Why or why not?

> What information is provided in a statement of added value?

> How are the various costs that comprise cost of goods sold reflected in a “type of expenditure” format income statement?

> What are the different ways in which IFRS might be used within a country?

> Assume that you have been invited to advise the newly established accounting oversight body in one of the former Eastern European countries that became a member of the EU in May 2004. The accounting oversight body is charged with the task of identifying

> The Vanguard Group is an investment fi rm with more than 50 different mutual funds in which the public may invest. Among these funds are 13 international funds that concentrate on investments in non-U.S. stocks and bonds. One of these is the Internationa

> According to Nobes, what are the two most important factors influencing differences in accounting systems across countries?

> A re there any major accounting issues that have not yet been covered by IFRS?

> What are the hypothesized relationships between the cultural value of uncertainty avoidance and the accounting values of conservatism and secrecy?

> What are the major problems caused by worldwide accounting diversity for international portfolio investment?

> Who are the major providers of capital (financing) for business enterprises? What influence does the relative importance of equity financing in a country have on financial statement disclosure?

> How does the relationship between financial reporting and taxation affect the manner in which income is measured for financial reporting purposes?

> What are the two major types of legal systems used in the world? How does the type of legal system affect accounting?

> How does harmonization differ from convergence?

> What would be the advantages of having a single set of accounting standards used worldwide?

> Since 2005, publicly traded companies in the European Union have been required to use IFRS in preparing their consolidated financial statements. Required: a. Explain the EU’s objective in requiring the use of IFRS. b. Identify and describe two issues th

> Where might one find information that could be used to measure the “multi nationality” of a company?

> What are some of the issues that arise in evaluating and maintaining control over foreign operations?

> What taxation issues arise as a result of making a foreign direct investment?

> How important is foreign direct investment to the world economy?

> Why might a company be interested in investing in an operation in a foreign country (foreign direct investment)?

> How important is international trade (imports and exports) to the world economy?

> The Financial Times, on Tuesday, April 13, 2004, made the following comment in its editorial “Parmalat: Perennial Lessons of European Scandal: Urgent need for better enforcement and investor scepticism”: After the accounting scandals in the US, there w

> T he objective of convergence between IFRS and U.S. GAAP is no longer a priority for the IASB. Required: Discuss the possible reasons for, and the consequences of, the IASB’s above decision.

> The SEC lifted the requirement for foreign companies that have used IFRS as the basis for preparing their financial statements: that to be eligible to list their shares in U.S. stock exchanges, they should reconcile their financial statements using U.S.

> “The IASB has been repeatedly accused of devising accounting standards that pay insufficient attention to the concerns and practices of companies. Some European banks and insurers complain about poor due process by the IASB, and Frits Bolkestein, Europea

> The IASB’s main objective is to develop a set of high-quality standards for financial reporting by companies at the international level. Required: Critically examine the possibility of achieving this objective.

> Geneva Technology Company (GTC), a Swiss-based company founded in 1999, is considering the use of IFRS in preparing its annual report for the year ended December 31, 2013. You are the manager of GTC’s fixed assets accounting department. Required: Identi

> Five factors are often mentioned as affecting a country’s accounting practices: (a) legal system, (b) taxation, (c) providers of financing, (d) inflation, and (e) political and economic ties. Required: Consider your home country. Identify which of

> Refer to Nobes’s judgmental classification of accounting systems in Exhibit 2.5 and consider the following countries: Austria, Brazil, Finland, Ivory Coast, Russia, and South Africa. Required: Identify the family of accounting in which

> Cultural dimension index scores developed by Hofstede for six countries are reported in the following table: Required: Using Gray’s hypothesis relating culture to the accounting value of secrecy, rate these six countries as relative

> Refer to the income statements presented in Exhibits 2.9, 2.10, 2.11, 2.12, and 2 .13 for Callaway Golf Company, Südzucker AG, Cemex S.A.B. de CV, Sol Meliá SA, and Thai Airways. Required: a. Calculate gross profit margin (g

> Various attempts have been made to reduce the accounting diversity that exists internationally. This process is known as convergence and is discussed in more detail in Chapter 3. The ultimate form of convergence would be a world in which all countries fo

> As noted in the chapter, diversity in accounting practice across countries generates problems for a number of different groups. Required: Answer the following questions and provide explanations for your answers. a. Which is the greatest problem arising

> Astra Zeneca PLC, based in the United Kingdom, and Abbott Laboratories, based in the United States, are two of the largest pharmaceutical firms in the world. The following information was provided in each company’s 2012 annual report.

> The New York Stock Exchange (NYSE) provides a list of non-U.S. companies listed on the exchange on its Web site (www.nyse.com). (Hint: Search the Internet for “NYSE List of Non-U.S. Listed Issuers.”) Required: a. Determine the number of foreign companie

> Global Electronics Company (GEC), a U.S. taxpayer, manufactures laser guitars in its Malaysian operation (LG-Malay) at a production cost of $120 per unit. LG Malay guitars are sold to two customers in the United States—Electronic Superstores (a GEC wholl

> Cooper Grant is the president of Acme Brush of Brazil, the wholly owned Brazilian subsidiary of U.S.-based Acme Brush Inc. Cooper Grant’s compensation package consists of a combination of salary and bonus. His annual bonus is calculated as a predetermine

> Sony Corporation reported the following in the Notes to Consolidated Financial Statements included in the company’s 2012 annual report on Form 20-F (p. F-49): Foreign Exchange Forward Contracts and Foreign Currency Option Contracts Foreign exchange forwa

> Sony Corporation reported the following in the summary of Significant Accounting Policies included in the company’s 2012 annual report on Form 20-F (p. F-16): Translation of Foreign Currencies All asset and liability accounts of foreign subsidiaries and

> The IRS has the authority to impose penalties on companies that significantly underpay taxes as a result of inappropriate transfer pricing. Acme Company transfers a product to a foreign affiliate at $15 per unit, and the IRS determines the correct price

> Ranger Company, a U.S. taxpayer, manufactures and sells medical products for animals. Ranger holds the patent on Z-meal, which it sells to horse ranchers in the United States. Ranger Company licenses its Bolivian subsidiary, Yery SA, to manufacture and s

> Denker Corporation has a wholly owned subsidiary in Sri Lanka that manufactures wooden bowls at a cost of $3 per unit. Denker imports the wooden bowls and sells them to retailers at a price of $12 per unit. The following information applies: Import dut

> ABC Company has subsidiaries in Countries X, Y, and Z. Each subsidiary manufactures one product at a cost of $10 per unit that it sells to each of its sister subsidiaries. Each buyer then distributes the product in its local market at a price of $15 per

> Guari Company, based in Melbourne, Australia, has a wholly owned subsidiary in Taiwan. The Taiwanese subsidiary manufactures bicycles at a cost equal to A$20 per bicycle, which it sells to Guari at an FOB shipping point price of A$100 each. Guari pays sh

> Smith-Jones Company, a U.S.-based corporation, owns 100 percent of Joal SA, located in Guadalajara, Mexico. Joal manufactures premium leather handbags at a cost of 500 Mexican pesos each. Joal sells its handbags to SmithJones, which sells them under Joal

> Akku Company imports die-cast parts from its German subsidiary that are used in the production of children’s toys. Per unit, part 169 costs the German subsidiary $1.00 to produce and $0.20 to ship to Akku Company. Akku Company uses part 169 to produce a

> Litchfield Corporation is a U.S.-based manufacturer of fashion accessories that produces umbrellas in its plant in Roanoke, Virginia, and sells directly to retailers in the United States. As chief financial officer, you are responsible for all of the com

> Superior Brakes Corporation manufactures truck brakes at its plant in Mansfield, Ohio, at a cost of $10 per unit. Superior sells its brakes directly to U.S. truck makers at a price of $15 per unit. It also sells its brakes to a wholly owned sales subsidi

> Lahdekorpi OY, a Finnish corporation, owns 100 percent of Three-O Company, a subsidiary incorporated in the United States. Required: Given the limited information provided, determine the best transfer pricing method and the appropriate transfer price in

> Bush Inc. has total income of $500,000. Bush’s Polish branch has foreign source income of $200,000 and paid taxes of $38,000 to the Polish government. The U.S. corporate tax rate is 35 percent. What is Bush’s overall f

> The exchange rate between the U.S. dollar (US$) and the euro (€) remained constant at €1.00  5  US$1.50 throughout 2013. Elizabeth Welch (a U.S. citizen) lives and works in France. In 2013, she earned income in France of €100,000, and paid taxes to the l

> The exchange rate between the U.S. dollar (US$) and the Hong Kong dollar (HK$) remained constant at HK$8.00 5 US$1.00 throughout 2013. Horace Gardner (a U.S. citizen) lives and works in Hong Kong. In 2013, Gardner earned income in Hong Kong of HK$960,000

> Brown Corporation has an affiliate in France (Brun SA) that sells products manufactured at Brown’s factory in Columbia, South Carolina. In the current year, Brun SA earned €10 million before tax. Assume that the effective tax rate Brun SA pays in France

> Use the information provided in problem 25. Now assume that Intec Corporation’s Chinese operation is organized as a branch, and repatriates after-tax profits of RMB 200,000 to Intec on October 1. Required: Determine the following related to the income e

> Intec Corporation (a U.S.-based company) has a wholly owned subsidiary located in Shanghai, China, that generated income before tax of 500,000 Chinese renminbi (RMB) in the current year. The Chinese subsidiary paid Chinese income taxes at the rate of 25

> The corporate income tax rates in two countries, A and B, are 40 percent and 25 percent, respectively. Additionally, both countries impose a 30 percent withholding tax on dividends paid to foreign investors. However, a bilateral tax treaty between A and

> Heraklion Company (a U.S.-based company) is considering making an equity investment in an Australian manufacturing operation. The total amount of capital, in Australian dollars (A$), that Heraklion would need to invest is A$1,000,000. Heraklion has three

> .S. International Corporation (USIC), a U.S. taxpayer, has investments in Foreign Entities A–G. Relevant information for these entities for the current fiscal year appears in the following table: Additional Information 1. USICâ&

> Eastwood Company (a U.S.-based company) has subsidiaries in three countries: X, Y, and Z. All three subsidiaries manufacture and sell products in their host country. Corporate income tax rates in these three countries over the most recent three-year peri

> Pendleton Company (a U.S. taxpayer) is a highly diversified company with wholly owned subsidiaries located in South Korea and Japan. The South Korean operation manufactures electric generators that are sold in the Asian market. It generated pretax income

> Daisan Company is in the process of deciding where to establish a European manufacturing operation: France, Spain, or Sweden. Daisan’s home country does not have a tax treaty with any of these countries. Regardless of location, the operation is expected

> Avioco Limited has two branches located in Hong Kong and Australia, each of which manufactures goods primarily for export to countries in the Asia Pacific region. The corporate income tax rate in Avioco’s home country is 20 percent. The

> Lionais Company has a foreign branch that earns income before income taxes of 500,000 currency units (CU). Income taxes paid to the foreign government are CU 150,000 (30 percent). Sales and other taxes paid to the foreign government are CU 50,000. Lionai

> Mama Corporation (a U.S. taxpayer) has a wholly owned sales subsidiary in the Bahamas (Bahamamama Ltd.) that purchases finished goods from its U.S. parent and sells those goods to customers throughout the Caribbean basin. In the most recent year, Bahamam

> Assume that Yankee’s operation in Great Britain is incorporated as a subsidiary. Required: Determine the amount of U.S. taxable income, U.S. foreign tax credit, and net U.S. tax liability related to the British subsidiary (all in U.S. dollars).

> Assume that Yankee’s operation in Great Britain is registered with the British government as a branch. Required: Determine the amount of U.S. taxable income, U.S. foreign tax credit, and net U.S. tax liability related to the British branch (all in U.S.

> Bay City Rollers Inc., a U.S. company, has a branch located in São Antonio and another in the Bahian Islands. The foreign source income from the São Antonio branch is $150,000, and the foreign source income from the Bahian Island branch is $225,000. The

> Gamma Holding NV, a Dutch textile company, presented the following calculation of operating profit in its 2009 consolidated income statement: € × 1,000,000 2009 Net turnover……&

> Swisscom AG, the principal provider of telecommunications in Switzerland, prepares consolidated financial statements in accordance with International Financial Reporting Standards (IFRS). Until 2007, Swisscom also reconciled its net income and stockholde

> Gamma Holding NV, a Dutch textile company, provided the following information in its consolidated income statement for the year 2009 (note that “result” is equivalent to “income”):

> The following excerpts were taken from the notes to consolidated financial statements in the 2006 annual report of the Novartis Group, the Swiss pharmaceutical company: Required: a. Determine whether the adjustments described in Note 33.9, Share-Based

> China Eastern Airlines (CEA) Corporation Limited prepares a set of financial statements in accordance with IFRS (in Chinese renminbi—RMB). Until 2007, the company also provided a reconciliation of IFRS net income and net assets to U.S.

> China Eastern Airlines (CEA) Corporation Limited presents two sets of financial statements in its annual report; one set is prepared in accordance with Chinese (PRC) accounting regulations, and one set is prepared in accordance with International Financi

> The parent company balance sheet for Babcock International Group PLC at March 31, 2010, is as follows: Required: Transform Babcock’s March 31, 2010, balance sheet to a U.S. format. Balance Sheet As at 31 March 2009 2009 2008 Notes

> SABMiller PLC was formed when U.S.-based Miller Brewing Company merged with South African Breweries in 2002. SABMiller uses IFRS in preparing its financial statements. The following is taken from the March 31, 2010, consolidated balance sheet of SABMille

> China Petroleum & Chemical Corporation (Sinopec) provides two sets of financial statements in its annual report. One set of financial statements is prepared in accordance with Chinese (PRC) Accounting Rules and Regulations, and the other is prepared

> Refer to the following information provided in the chapter for Arcot Company: • Consolidated financial statements in Exhibits 10.8 and 10.9. • Differences between Local GAAP and U.S. GAAP in Exhibit 10.10.

> Refer to the following information provided in the chapter for Arcot Company: • Consolidated financial statements in Exhibits 10.8 and 10.9. • Differences between Local GAAP and U.S. GAAP in Exhibit 10.10.

> Vale S.A., a Brazilian mineral products company, provided the following note on a voluntary basis in its 2009 annual report: 11—Cash Generation (Unaudited) Consolidated operating cash generation measured by EBITDA (earnings before fi na

> Palmers town Company established a subsidiary in a foreign country on January 1, Year 1, by investing 8,000,000 pounds when the exchange rate was $1.00/pound. Palmers town negotiated a bank loan of 4,000,000 pounds on January 5, Year 1, and purchased pla

> The consolidated income statement for Babcock International Group PLC is presented here: The income statement does not disclose any detail on the operating expenses that were subtracted in determining operating profit, but refers readers to several not

> The following Statement of Added Value (in millions of Brazilian reals) was presented in the 2009 annual report of Vale S.A., a Brazilian mineral products company: Required: a. Identify the external parties who might be interested in the information p

> Neopost SA is a French company operating mainly in Europe and the United States that sells and leases mailroom equipment. In accordance with IFRS, the company capitalizes development costs when certain criteria are met. The company reported the following

> Refer to the worksheets in Exhibits 10.12 and 10.13 in which the financial statements of Arcot Company have been restated to U.S. GAAP. Required: a. Calculate each of the ratios listed below using (1) the Local GAAP amounts in Column 1, and (2) the U.S.

> Geographic segment information can be used to determine how multinational a company is and the extent to which a company is diversified internationally. Refer to the geographic segment information provided by three U.S. companies in Exhibit 9.9. Require