CH 19

ch19
Student: ___________________________________________________________________________
1.
Accounting information is the means by which firms communicate their financial position to the providers of capital. True False
2.
Accounting is shaped by the environment in which it operates. True False
3.
In the United States, government regulations require firms to publish detailed information about their training and employment policies. True False
4.
Since 2001, the U.S. requires that goodwill associated with acquisitions has to be amortized against earnings. True False
5.
When one company acquires another in a takeover, the value of the goodwill is calculated as the amount paid for a firm above its book value. True False
6.
In the United States, banks are the most important source of external capital for business enterprises. True False
7.
In the United States and Great Britain, the financial accounting system is oriented toward providing individual investors with the information they need to make decisions about purchasing or selling corporate stocks and bonds. True False
8.
Since banks are the major providers of capital in countries like Germany, financial accounting practices involve overvaluing assets and valuing liabilities conservatively. True False
9.
Similarities in the accounting systems of countries are sometimes due to the countries' close political and/or economic ties. True False
10. Current cost accounting adjusts all items in a financial statement to factor out the effects of inflation. True False
11. Developed nations tend to have small, complex organizations, whose accounting problems are far more difficult than those of large organizations. True False
12. According to Hofstede, countries such as Britain, the United States and Sweden are characterized by high uncertainty avoidance. True False
13. Auditing standards are rules for preparing financial statements and define what useful accounting information is. True False
14. An investor based in the Middle East buying Exxon Mobil Corporation stock through the New York Stock Exchange would be an example of transnational financing. True False
15. Transnational investment occurs when a firm based in one country enters another country's capital market to raise capital from the sale of stocks or bonds. True False
16. The International Accounting Standards Board was formed in March 2001 to replace the International Accounting Standards Committee. True False
17. The IASB has enough regulatory muscle to enforce its standards. True False
18. The impact of the IASB standards has probably been least noticeable in the United States because of policy directives that direct U.S. public companies to adhere to domestic standards. True False
19. EU directives have the power of law and so it can be assumed that the EU has a better chance of harmonizing accounting standards than the IASB. True False
20. The IASB has developed accounting standards for firms seeking stock listings in global markets. True False
21. A consolidated financial statement combines the separate financial statements of two or more companies to yield a single set of financial statements as if the individual companies were really one. True False
22. Many firms find it disadvantageous to organize as a set of separate legal entities. True False
23. The subsidiaries of a multinational company are separate legal entities as well as separate economic entities. True False
24. The purpose of consolidated financial statements is to provide accounting information about a group of companies that recognize their economic interdependence. True False
25. Transactions among the members of a corporate family are not included in consolidated financial statements. True False
26. Without consolidated financial statements, a multinational firm could conceal losses in an unconsolidated subsidiary. True False
27. Foreign subsidiaries of multinational firms normally keep their accounting records and prepare their financial statements in US dollars. True False
28. It is possible that a multinational's balance sheet may not balance when it uses the temporal method to translate the accounts of a foreign subsidiary. True False
29. Under a current rate method, the exchange rate at the balance sheet date is used to translate the financial statements of a foreign subsidiary into the home currency of the multinational firm. True False
30. According to Statement 52, "Foreign Currency Translation," the functional currency of an integral subsidiary is to be the home currency. True False
31. Most international businesses require all budgets and performance data within the firm to be expressed in the "corporate currency," which is normally the home currency. True False
32. Subunit goals are determined solely by the head office. True False
33. The balance sheet is the main instrument of financial control. True False
34. According to Lessard and Lorange, the three exchange rates that can be used to translate foreign currencies into the corporate currency are the historical rate, the spot rate, and the forward rate. True False
35. According to Lessard and Lorange, the ending rate is the spot exchange rate forecast for the end of the budget period. True False
36. Managers should use the ending rate to translate the budget and the initial rate to translate actual performance data. True False
37. Firms pursuing the global strategy and the transnational strategy disperse each value creation activity to its optimal location in the world. True False
38. Transfer price must be considered when setting budgets and evaluating a subsidiary's performance. True False
39. Managers of foreign subsidiaries should never be evaluated in local currency terms. True False
40. Foreign subsidiaries operate in uniform environments. True False
41. Identify the incorrect statement pertaining to accounting information. A. B. C. D. It is often referred to as "the language of business." It is means by which firms report their income to the government. It is consistent and standard across all countries. It enables the providers of capital to assess the value of their investments.
42. A key accounting problem faced by international businesses but that does not confront purely domestic businesses is: A. B. C. D. the lack of consistency in the accounting standards of different countries. the consistent, inaccurate filing of profit-and-loss statements by all international businesses. the total lack of the accounting functions in international firms. international firms not reporting their income to the government.
43. Any advantage, such as a trademark or brand name that enables a firm to earn higher profits than its competitors is best known as a firm's: A. B. C. D. operating advantage. proprietary advantage. core competency. goodwill.
44. Identify the incorrect statement regarding the differences in the treatment of goodwill across countries. A When one company acquires another in a takeover, the value of the goodwill is calculated as the amount . paid for a firm above its book value. B Accounting rules in many countries allow acquiring firms to deduct the value of goodwill from the . amount of equity or net worth reported on their balance sheet. C. Since 2001, the U.S. requires that goodwill associated with acquisitions has to be amortized against earnings. D.In the United States, until recently goodwill has had to be deducted from the profits of the acquiring firm over as much as 40 years. 45. Which of the following is not one of the main variables that influence the development of a country's accounting system? A. B. C. D. The relationship between individuals and social groups Political and economic ties with other countries The level of inflation The prevailing culture in a country
46. Which of the following statement about the external sources of capital is not true? A A country's accounting system tends to reflect the relative importance of individual investors, banks, and . government as providers of capital. B. The three main external sources of capital for businesses are individual investors, banks, and government. C. In most advanced countries, only one of the main sources of external capital is important. D. The importance of each source of capital varies from country to country. 47. In the United States, _____ are the major source of external capital. A. B. C. D. individual investors banks government retained earnings
48. Which of the following observations is true of the financial accounting system of countries such as Switzerland, Germany, and Japan? A. B. C. D. Historically, individual investors satisfied most of the capital needs of businesses. Banks play an insignificant role in satisfying the capital needs of businesses. Government regulations do not mandate any public disclosure of a firm's financial position. Assets are valued conservatively and liabilities are overvalued.
49. Historically, financial reports prepared by firms in Germany: A. B. C. D. tended to contain less information than those of British or U.S. firms. tended to contain all information required by individual investors. did not make any public disclosure of a firm's financial position. overvalued assets and undervalued liabilities.
50. Identify the country where historically the national government has been a more important provider of capital, which has influenced accounting practices. A. B. C. D. United States France Germany Switzerland
51. Identify the country whose accounting practices have not been influenced by the U.S. accounting system. A. B. C. D. Canada Mexico Philippines Germany
52. The historic cost principle: A. assumes the currency unit used to report financial results is not losing its value due to inflation. B. records sales, purchases, and the like at an adjusted transaction price and makes minor adjustments in the amounts later. C. does not affect accounting in the area of asset valuation. D. overestimates a firm's assets if inflation is high. 53. This accounting method adjusts all items in a financial statementassets, liabilities, costs, and revenues to factor out the effects of inflation. A. B. C. D. Current cost accounting Operating profit method Historic cost principle Economic accounting
54. Developed nations tend to have far more sophisticated accounting practices than less developed countries because: A. they have large organizations whose accounting problems are more straightforward than those of small organizations. B. the workforce in these countries is highly educated and skilled and can perform complex accounting functions. C. their accounting practices have been inherited from their former colonial rulers. D. their financial systems are highly controlled by their respective governments and other international regulatory bodies.
55. _____ refers to the extent to which cultures socialize their members to accept ambiguous situations. A. B. C. D. Noblesse oblige Uncertainty avoidance Social interaction Cultural dilemma
56. According to Hofstede, which of the following countries is characterized by low uncertainty avoidance? A. B. C. D. Greece Sweden Japan Mexico
57. Which of the following are rules for preparing financial statements and define what useful accounting information is? A. B. C. D. Financial standards Auditing standards Accounting standards Operating standards
58. The technical process by which an independent person gathers evidence for determining if financial accounts conform to required accounting standards and if they are also reliable is known as: A. B. C. D. an accounting guideline. an operating procedure. standardization. an audit.
59. Until recently, which of the following accounting practices has been true? A. B. C. D. Japanese law generally allowed revaluation. Dutch standards prohibited revaluation and prescribes historic cost. Capitalization of financial leases was required practice in France. German accountants have treated depreciation as a liability.
60. Transnational _____ occurs when a firm based in one country enters another country's capital market to raise capital from the sale of stocks or bonds. A. B. C. D. financing development sale investment
61. A German firm raising capital by selling stock through the London Stock Exchange is an example of: A. B. C. D. transnational financing. transnational development. transnational sale. transnational investment.
62. An investor based in Japan buying General Motors stock through the NYSE would be an example of: A. B. C. D. transnational financing. transnational development. transnational sale. transnational investment.
63. A Danish firm raising capital in London must issue financial reports that serve the needs of its British investors in addition to its Danish financial reports. This is an example of: A. B. C. D. global financial analysis. multinational fiscal coverage. international capital documentation. transnational financial reporting.
64. The International Accounting Standards Board: A. B. C. D. has no power to enforce its standards. was formed to replace the Financial Accounting Standards Board. has 120 members responsible for the formulation of new financial reporting standards. requires approval from 80 percent of its 120 members to issue a new standard.
65. To date, the impact of the IASB standards has probably been least noticeable in the United States because: A. compliance is voluntary. B most IASB standards have been consistent with opinions already articulated by the U.S. Financial . Accounting Standards Board (FASB). C. significant differences exist between the IASB standards and generally accepted accounting principles. D. most U.S. companies already use IASB standards to report their results. 66. The _____ writes the generally accepted accounting principles (GAAP) that govern the financial statements of U.S. firms. A. B. C. D. Office of Economic Analysis US Securities and Exchange Commission International Accounting Standards Board Financial Accounting Standards Board
67. Which of the following statements is true regarding the European Union (EU) and its influence on accounting standards? A Adoption of the directives issued by the EU is voluntary and member states are not obligated to . incorporate them into their own national laws. B. The EU may have a better chance of achieving harmonization than the IASB. C The EU requires that the financial accounts issued by publicly listed companies in the EU are to be in . accordance with European standards. D The objective of the requirements of the EU is to ensure the financial positions of companies from . different member states are represented according to their national laws.
68. A _____ combines the separate financial statements of two or more companies to yield a single set of financial statements as if the individual companies were really one. A. B. C. D. complied financial statement harmonized financial statement consolidated financial statement operating financial statement
69. Many firms find it advantageous to organize as a set of separate legal entities or subsidiaries because of all of the following reasons except: A. B. C. D. it limits their total legal liability. to take advantage of corporate tax regulations. of legal requirements in the countries in which they do business. subsidiaries are all separate economic entities.
70. Consolidated financial statements: A. provide accounting information about a group of companies that recognize their economic interdependence. B. record transactions among the members of a corporate family. C. show assets, liabilities, revenues, and expenses of members of a corporate family. D. issue individual financial statements for the parent company and each subsidiary. 71. Foreign subsidiaries of multinational firms normally: A. B. C. D. keep their accounting records in the currency of the country in which they are located. do not prepare their financial statements. prepare their financial statements in US dollars. keep their accounting records in US dollars.
72. Under the _____, the exchange rate at the balance sheet date is used to translate the financial statements of a foreign subsidiary into the home currency of the multinational firm. A. B. C. D. temporal method current rate method operating cost accounting method historic cost principle
73. Which of the following methods translates assets valued in a foreign currency into the home-country currency using the exchange rate that exists when the assets are purchased? A. B. C. D. Temporal method Current rate method Operating cost accounting method Historic cost principle
74. According to Statement 52, "Foreign Currency Translation," issued by the Financial Accounting Standards Board: A. the functional currency of a self-sustaining foreign subsidiary is to be the currency of its parent company. B the balance sheet of a self-sustaining foreign subsidiary is translated into the local currency using the . exchange rate in effect at the end of the firm's financial year. C.the income statement of a self-sustaining foreign subsidiary is translated using the average exchange rate for the firm's financial year. D. the functional currency of an integral subsidiary is to be the local currency. 75. Which of the following is typically not a main step in the control process by which a corporate headquarters controls subunits within the organization? A. Head office and subunit management jointly determine subunit goals for the coming year. B. Head office monitors subunit performance against the agreed goals only at the end of the year. C. If a subunit fails to achieve its goals, the head office intervenes in the subunit to learn why the shortfall occurred. D. If a subunit fails to achieve its goals, the head office can take appropriate corrective action if required. 76. Which among the following combinations of the Lessard-Lorange model is considered illogical and unreasonable? A. B. C. D. Translating the budget using the projected rate and actual performance using the initial rate Translating the budget using the initial rate and actual performance using the initial rate Translating the budget and actual performance using the projected rate Translating the budget and actual performance using the ending rate
77. In which of the following combinations of the Lessard-Lorange model is it possible that the ending spot exchange rate used to evaluate performance against the budget might be quite different from the initial spot exchange rate used to translate the budget? A. B. C. D. II IE EE PP
78. Lessard and Lorange refer to company-generated forecasts of future spot rates as the: A. B. C. D. ending rate. future rate. domestic rate. internal forward rate.
79. Firms pursuing _____ business strategies disperse each value creation activity to its optimal location in the world. A. B. C. D. localization and transnational global and localization transnational and global localization and international
80. Which of the following statements is true regarding assessing the performance of a foreign subsidiary and its managers? A. It is inappropriate to compare subsidiaries against each other on the basis of return on investment (ROI). B. Foreign subsidiaries operate in widely similar economic, political, and social conditions. C. Managers should be evaluated in local currency terms after making allowances for items over which they have no control. D. The evaluation of a subsidiary should be combined with the evaluation of its manager. 81. Describe accounting in international business. What is accounting information?
82. Identify a key accounting problem that international businesses are confronted with but that does not confront purely domestic businesses. Substantiate with a suitable example.
83. What are the five main variables that influence the development of a country's accounting system?
84. What is the relationship between business, providers of capital, and the development of a country's accounting system?
85. How is a country's accounting system affected by the providers of capital? Explain with the help of suitable examples.
86. How do political and economic ties with other countries influence the development of a country's accounting system?
87. What is the historic cost principle?
88. Describe the current cost accounting system.
89. Identify the reasons why accounting in developed countries tends to be far more sophisticated than it is in less developed countries.
90. How does the culture of a country influence the nature of its accounting system? What is uncertainty avoidance?
91. What are auditing standards? How are they different from accounting standards?
92. With the help of examples, differentiate between transnational financing and transnational investments.
93. Write a short note on the International Accounting Standards Board (IASB)?
94. Highlight the role of the European Union (EU) in harmonization of accounting standards in the EU.
95. What is a consolidated financial statement? What type of firms usually makes use of it?
96. Why is it advantageous for firms to organize themselves as a set of separate legal entities? How do consolidated financial statements benefit these firms?
97. Describe the current rate method used by firms to determine what exchange rate should be used when translating financial statement currencies.
98. What is the temporal method used to translate the accounts of a foreign subsidiary? Explain with the help of an example.
99. Describe the Statement 52, whose requirements all U.S.-based multinational firms must follow.
100.Describe the Lessard-Lorange Model.
ch19 Key
1.
(p. 632)
Accounting information is the means by which firms communicate their financial position to the providers of capital. TRUE
AACSB: Analytic Skills Bloom's: Knowledge Difficulty: Easy Hill - Chapter 19 #1 Learning Objective: 19-01
2.
(p. 632)
Accounting is shaped by the environment in which it operates. TRUE

3.
(p. 633)
In the United States, government regulations require firms to publish detailed information about their training and employment policies. FALSE
AACSB: Analytic Skills Bloom's: Knowledge Difficulty: Medium Hill - Chapter 19 #3 Learning Objective: 19-01
4.
(p. 633)
Since 2001, the U.S. requires that goodwill associated with acquisitions has to be amortized against earnings. FALSE
AACSB: Analytic Skills Bloom's: Comprehension Difficulty: Hard Hill - Chapter 19 #4 Learning Objective: 19-01
5.
(p. 633)
When one company acquires another in a takeover, the value of the goodwill is calculated as the amount paid for a firm above its book value. TRUE
6.
(p. 633)
In the United States, banks are the most important source of external capital for business enterprises. FALSE
7.
(p. 634)
In the United States and Great Britain, the financial accounting system is oriented toward providing individual investors with the information they need to make decisions about purchasing or selling corporate stocks and bonds. TRUE
AACSB: Analytic Skills Bloom's: Comprehension Difficulty: Medium Hill - Chapter 19 #7 Learning Objective: 19-01
8.
(p. 634)
Since banks are the major providers of capital in countries like Germany, financial accounting practices involve overvaluing assets and valuing liabilities conservatively. FALSE
9.
(p. 635)
Similarities in the accounting systems of countries are sometimes due to the countries' close political and/or economic ties. TRUE
10.
(p. 635)
Current cost accounting adjusts all items in a financial statement to factor out the effects of inflation. TRUE
11.
(p. 635)
Developed nations tend to have small, complex organizations, whose accounting problems are far more difficult than those of large organizations. FALSE
12.
(p. 636)
According to Hofstede, countries such as Britain, the United States and Sweden are characterized by high uncertainty avoidance. FALSE
AACSB: Multicultural/Diversity Understanding Bloom's: Comprehension Difficulty: Medium Hill - Chapter 19 #12 Learning Objective: 19-01
13.
(p. 636)
Auditing standards are rules for preparing financial statements and define what useful accounting information is. FALSE
14.
(p. 636)
An investor based in the Middle East buying Exxon Mobil Corporation stock through the New York Stock Exchange would be an example of transnational financing. FALSE
AACSB: Analytic Skills Bloom's: Application Difficulty: Medium Hill - Chapter 19 #14 Learning Objective: 19-02
15.
(p. 637)
Transnational investment occurs when a firm based in one country enters another country's capital market to raise capital from the sale of stocks or bonds. FALSE
16.
(p. 637)
The International Accounting Standards Board was formed in March 2001 to replace the International Accounting Standards Committee. TRUE
17.
(p. 638)
The IASB has enough regulatory muscle to enforce its standards. FALSE
18.
(p. 639)
The impact of the IASB standards has probably been least noticeable in the United States because of policy directives that direct U.S. public companies to adhere to domestic standards. FALSE
19.
(p. 639)
EU directives have the power of law and so it can be assumed that the EU has a better chance of harmonizing accounting standards than the IASB. TRUE
20.
(p. 639)
The IASB has developed accounting standards for firms seeking stock listings in global markets. TRUE
21.
(p. 639)
A consolidated financial statement combines the separate financial statements of two or more companies to yield a single set of financial statements as if the individual companies were really one. TRUE
22.
(p. 640)
Many firms find it disadvantageous to organize as a set of separate legal entities. FALSE
23.
(p. 640)
The subsidiaries of a multinational company are separate legal entities as well as separate economic entities. FALSE
24.
(p. 641)
The purpose of consolidated financial statements is to provide accounting information about a group of companies that recognize their economic interdependence. TRUE
25.
(p. 641)
Transactions among the members of a corporate family are not included in consolidated financial statements. TRUE
26.
(p. 642)
Without consolidated financial statements, a multinational firm could conceal losses in an unconsolidated subsidiary. TRUE
AACSB: Analytic Skills Bloom's: Comprehension Difficulty: Easy Hill - Chapter 19 #26 Learning Objective: 19-04
27.
(p. 642)
Foreign subsidiaries of multinational firms normally keep their accounting records and prepare their financial statements in US dollars. FALSE
28.
(p. 642)
It is possible that a multinational's balance sheet may not balance when it uses the temporal method to translate the accounts of a foreign subsidiary. TRUE
29.
(p. 642)
Under a current rate method, the exchange rate at the balance sheet date is used to translate the financial statements of a foreign subsidiary into the home currency of the multinational firm. TRUE
30.
(p. 643)
According to Statement 52, "Foreign Currency Translation," the functional currency of an integral subsidiary is to be the home currency. FALSE
31.
(p. 644)
Most international businesses require all budgets and performance data within the firm to be expressed in the "corporate currency," which is normally the home currency. TRUE
32.
(p. 644)
Subunit goals are determined solely by the head office. FALSE

33.
(p. 644)
The balance sheet is the main instrument of financial control. FALSE

34.
(p. 644645)
According to Lessard and Lorange, the three exchange rates that can be used to translate foreign currencies into the corporate currency are the historical rate, the spot rate, and the forward rate. FALSE
35.
(p. 645)
According to Lessard and Lorange, the ending rate is the spot exchange rate forecast for the end of the budget period. FALSE
36.
(p. 645)
Managers should use the ending rate to translate the budget and the initial rate to translate actual performance data. FALSE
37.
(p. 646)
Firms pursuing the global strategy and the transnational strategy disperse each value creation activity to its optimal location in the world. TRUE
38.
(p. 646)
Transfer price must be considered when setting budgets and evaluating a subsidiary's performance. TRUE
39.
(p. 647)
Managers of foreign subsidiaries should never be evaluated in local currency terms. FALSE
40.
(p. 647)
Foreign subsidiaries operate in uniform environments. FALSE

41.
(p. 632)
Identify the incorrect statement pertaining to accounting information. A. B. C. D. It is often referred to as "the language of business." It is means by which firms report their income to the government. It is consistent and standard across all countries. It enables the providers of capital to assess the value of their investments.
Different countries follow different accounting standards.

42.
(p. 632)
A key accounting problem faced by international businesses but that does not confront purely domestic businesses is: A. B. C. D. the lack of consistency in the accounting standards of different countries. the consistent, inaccurate filing of profit-and-loss statements by all international businesses. the total lack of the accounting functions in international firms. international firms not reporting their income to the government.
The lack of consistency in the accounting standards of different countries makes it very difficult for international investors to accurately value firms.
43.
(p. 633)
Any advantage, such as a trademark or brand name that enables a firm to earn higher profits than its competitors is best known as a firm's: A. B. C. D. operating advantage. proprietary advantage. core competency. goodwill.
The treatment of goodwill varies based on a country's accounting standards.

44.
(p. 633)
Identify the incorrect statement regarding the differences in the treatment of goodwill across countries. A When one company acquires another in a takeover, the value of the goodwill is calculated as the . amount paid for a firm above its book value. B Accounting rules in many countries allow acquiring firms to deduct the value of goodwill from the . amount of equity or net worth reported on their balance sheet. C. Since 2001, the U.S. requires that goodwill associated with acquisitions has to be amortized against earnings. D.In the United States, until recently goodwill has had to be deducted from the profits of the acquiring firm over as much as 40 years. In 2001, the United States changed the way it treated goodwill and no longer required that goodwill associated with acquisitions had to be amortized against earnings.
45.
(p. 633)
Which of the following is not one of the main variables that influence the development of a country's accounting system? A. B. C. D. The relationship between individuals and social groups Political and economic ties with other countries The level of inflation The prevailing culture in a country
The main variables that influence the development of a country's accounting system are the relationship between business and the providers of capital, the political and economic ties with other countries, the level of inflation, the level of a country's economic development and the prevailing culture in a country.
46.
(p. 633)
Which of the following statement about the external sources of capital is not true? A A country's accounting system tends to reflect the relative importance of individual investors, banks, . and government as providers of capital. B. The three main external sources of capital for businesses are individual investors, banks, and government. C. In most advanced countries, only one of the main sources of external capital is important. D. The importance of each source of capital varies from country to country. In most advanced countries, all three sources of capital are important.
47.
(p. 633)
In the United States, _____ are the major source of external capital. A. B. C. D. individual investors banks government retained earnings
In the United States, business firms can raise capital by selling shares and bonds to individual investors through the stock market and the bond market.
48.
(p. 634)
Which of the following observations is true of the financial accounting system of countries such as Switzerland, Germany, and Japan? A. B. C. D. Historically, individual investors satisfied most of the capital needs of businesses. Banks play an insignificant role in satisfying the capital needs of businesses. Government regulations do not mandate any public disclosure of a firm's financial position. Assets are valued conservatively and liabilities are overvalued.
In countries such as Switzerland, Germany, and Japan, historically a few large banks satisfied most of the capital needs of business enterprises. Individual investors have until recently played a relatively minor role. Government regulations in these countries mandate some public disclosure of a firm's financial position.
49.
(p. 634)
Historically, financial reports prepared by firms in Germany: A. B. C. D. tended to contain less information than those of British or U.S. firms. tended to contain all information required by individual investors. did not make any public disclosure of a firm's financial position. overvalued assets and undervalued liabilities.
In countries like Japan, Switzerland, and Germany, the information needs of the capital providers are satisfied in relatively straightforward ways and consequently the reports have historically tended to contain less information than those of British or U.S. firms.
50.
(p. 634)
Identify the country where historically the national government has been a more important provider of capital, which has influenced accounting practices. A. B. C. D. United States France Germany Switzerland
In France, the national government has often stepped in to make loans or to invest in firms whose activities are deemed in the "national interest."
51.
(p. 635)
Identify the country whose accounting practices have not been influenced by the U.S. accounting system. A. B. C. D. Canada Mexico Philippines Germany
The U.S. accounting system has influenced accounting practices in Canada and Mexico, and since passage of NAFTA, the accounting systems in these three countries seem set to converge on a common set of norms. A U.S.-style accounting system is also used in the Philippines, which was once a U.S. protectorate.
52.
(p. 635)
The historic cost principle: A. assumes the currency unit used to report financial results is not losing its value due to inflation. B. records sales, purchases, and the like at an adjusted transaction price and makes minor adjustments in the amounts later. C. does not affect accounting in the area of asset valuation. D. overestimates a firm's assets if inflation is high. When accounting is based on the historic cost principle firms record sales, purchases, and the like at the original transaction price and make no adjustments in the amounts later. This principle affects accounting most significantly in the area of asset valuation. If inflation is high, the historic cost principle underestimates a firm's assets.
53.
(p. 635)
This accounting method adjusts all items in a financial statementassets, liabilities, costs, and revenuesto factor out the effects of inflation. A. B. C. D. Current cost accounting Operating profit method Historic cost principle Economic accounting
The current cost accounting method uses a general price index to convert historic figures into current values.
54.
(p. 635)
Developed nations tend to have far more sophisticated accounting practices than less developed countries because: A. they have large organizations whose accounting problems are more straightforward than those of small organizations. B. the workforce in these countries is highly educated and skilled and can perform complex accounting functions. C. their accounting practices have been inherited from their former colonial rulers. D. their financial systems are highly controlled by their respective governments and other international regulatory bodies. Developed nations tend to have large, complex organizations, whose accounting problems are far more difficult than those of small organizations. In much of the developing world, the accounting system used is inherited from former colonial powers.
55.
(p. 636)
_____ refers to the extent to which cultures socialize their members to accept ambiguous situations. A. B. C. D. Noblesse oblige Uncertainty avoidance Social interaction Cultural dilemma
Research suggests that countries with low uncertainty avoidance cultures tend to have strong independent auditing professions that audit a firm's accounts to make sure they comply with generally accepted accounting regulations.
AACSB: Multicultural/Diversity Understanding Bloom's: Knowledge Difficulty: Easy Hill - Chapter 19 #55 Learning Objective: 19-01
56.
(p. 636)
According to Hofstede, which of the following countries is characterized by low uncertainty avoidance? A. B. C. D. Greece Sweden Japan Mexico
According to Hofstede, countries such as Britain, the United States and Sweden are characterized by low uncertainty avoidance, while countries such as Japan, Mexico, and Greece have higher uncertainty avoidance.
AACSB: Multicultural/Diversity Understanding Bloom's: Knowledge Difficulty: Medium Hill - Chapter 19 #56 Learning Objective: 19-01
57.
(p. 636)
Which of the following are rules for preparing financial statements and define what useful accounting information is? A. B. C. D. Financial standards Auditing standards Accounting standards Operating standards
Historically, the result of national differences in accounting standards has been a general lack of comparability of financial reports from one country to another.
58.
(p. 636)
The technical process by which an independent person gathers evidence for determining if financial accounts conform to required accounting standards and if they are also reliable is known as: A. B. C. D. an accounting guideline. an operating procedure. standardization. an audit.
Auditing standards specify the rules for performing an audit.

59.
(p. 636)
Until recently, which of the following accounting practices has been true? A. B. C. D. Japanese law generally allowed revaluation. Dutch standards prohibited revaluation and prescribes historic cost. Capitalization of financial leases was required practice in France. German accountants have treated depreciation as a liability.
Until recently, Dutch standards favored the use of current values for replacement assets; Japanese law generally prohibited revaluation and prescribed historic cost. Also, capitalization of financial leases was required practice in Great Britain, but not practiced in France.
60.
(p. 636)
Transnational _____ occurs when a firm based in one country enters another country's capital market to raise capital from the sale of stocks or bonds. A. B. C. D. financing development sale investment
Over the last decade large firms have been increasing their use of transnational financing by gaining listings, and ultimately issuing stock, on foreign stock exchanges.
61.
(p. 636637)
A German firm raising capital by selling stock through the London Stock Exchange is an example of: A. B. C. D. transnational financing. transnational development. transnational sale. transnational investment.
Transnational financing occurs when a firm based in one country enters another country's capital market to raise capital from the sale of stocks or bonds.
62.
(p. 637)
An investor based in Japan buying General Motors stock through the NYSE would be an example of: A. B. C. D. transnational financing. transnational development. transnational sale. transnational investment.
Transnational investment occurs when an investor based in one country enters the capital market of another nation to invest in the stocks or bonds of a firm based in that country.
63.
(p. 637)
A Danish firm raising capital in London must issue financial reports that serve the needs of its British investors in addition to its Danish financial reports. This is an example of: A. B. C. D. global financial analysis. multinational fiscal coverage. international capital documentation. transnational financial reporting.
The rapid expansion of transnational financing and investment in recent years has been accompanied by a corresponding growth in transnational financial reporting.
64.
(p. 638)
The International Accounting Standards Board: A. B. C. D. has no power to enforce its standards. was formed to replace the Financial Accounting Standards Board. has 120 members responsible for the formulation of new financial reporting standards. requires approval from 80 percent of its 120 members to issue a new standard.
The IASB was formed to replace the International Accounting Standards Committee. The IASB has 14 members and in order to issue a new standard, 75 percent of the 14 members of the board must agree.
65.
(p. 639)
To date, the impact of the IASB standards has probably been least noticeable in the United States because: A. compliance is voluntary. B. most IASB standards have been consistent with opinions already articulated by the U.S. Financial Accounting Standards Board (FASB). C. significant differences exist between the IASB standards and generally accepted accounting principles. D. most U.S. companies already use IASB standards to report their results. The FASB writes the generally accepted accounting principles (GAAP) that govern the financial statements of U.S. firms.
66.
(p. 639)
The _____ writes the generally accepted accounting principles (GAAP) that govern the financial statements of U.S. firms. A. B. C. D. Office of Economic Analysis US Securities and Exchange Commission International Accounting Standards Board Financial Accounting Standards Board
The U.S. Financial Accounting Standards Board (FASB) writes the generally accepted accounting principles (GAAP) that govern the financial statements of U.S. firms.
67.
(p. 639)
Which of the following statements is true regarding the European Union (EU) and its influence on accounting standards? A Adoption of the directives issued by the EU is voluntary and member states are not obligated to . incorporate them into their own national laws. B. The EU may have a better chance of achieving harmonization than the IASB. C.The EU requires that the financial accounts issued by publicly listed companies in the EU are to be in accordance with European standards. D The objective of the requirements of the EU is to ensure the financial positions of companies from . different member states are represented according to their national laws. The EU has issued directives that member states are obligated to incorporate into their own national laws. Because EU directives have the power of law, we might assume the EU has a better chance of achieving harmonization than the IASB does. The EU has required that from January 1, 2005 onwards, financial accounts issued by some 7,000 publicly listed companies in the EU were to be in accordance with IASB standards. This requirement might make it easier to compare the financial position of companies from different EU member states.
68.
(p. 639)
A _____ combines the separate financial statements of two or more companies to yield a single set of financial statements as if the individual companies were really one. A. B. C. D. complied financial statement harmonized financial statement consolidated financial statement operating financial statement
Multinational firms that comprise of a parent company and a number of subsidiary companies located in various other countries typically issue consolidated financial statements.
69.
(p. 640)
Many firms find it advantageous to organize as a set of separate legal entities or subsidiaries because of all of the following reasons except: A. B. C. D. it limits their total legal liability. to take advantage of corporate tax regulations. of legal requirements in the countries in which they do business. subsidiaries are all separate economic entities.
Subsidiaries may be separate legal entities but they are not separate economic entities.
70.
(p. 641)
Consolidated financial statements: A. provide accounting information about a group of companies that recognize their economic interdependence. B. record transactions among the members of a corporate family. C. show assets, liabilities, revenues, and expenses of members of a corporate family. D. issue individual financial statements for the parent company and each subsidiary. Consolidated financial statements merge the accounts of a parent company and each of its subsidiaries. Transactions among the members of a corporate family are not included in consolidated financial statements; only assets, liabilities, revenues, and expenses with external third parties are shown.
71.
(p. 642)
Foreign subsidiaries of multinational firms normally: A. B. C. D. keep their accounting records in the currency of the country in which they are located. do not prepare their financial statements. prepare their financial statements in US dollars. keep their accounting records in US dollars.
When a multinational prepares consolidated accounts, it must convert all financial statements into the currency of its home country.
72.
(p. 642)
Under the _____, the exchange rate at the balance sheet date is used to translate the financial statements of a foreign subsidiary into the home currency of the multinational firm. A. B. C. D. temporal method current rate method operating cost accounting method historic cost principle
The current rate method may seem logical but it is incompatible with the historic cost principle which is a generally accepted accounting principle in many countries.
73.
(p. 642)
Which of the following methods translates assets valued in a foreign currency into the home-country currency using the exchange rate that exists when the assets are purchased? A. B. C. D. Temporal method Current rate method Operating cost accounting method Historic cost principle
The temporal method will ensure that the dollar value of the land does not fluctuate due to exchange rate changes.
74.
(p. 643)
According to Statement 52, "Foreign Currency Translation," issued by the Financial Accounting Standards Board: A. the functional currency of a self-sustaining foreign subsidiary is to be the currency of its parent company. B the balance sheet of a self-sustaining foreign subsidiary is translated into the local currency using the . exchange rate in effect at the end of the firm's financial year. C.the income statement of a self-sustaining foreign subsidiary is translated using the average exchange rate for the firm's financial year. D. the functional currency of an integral subsidiary is to be the local currency. The local currency of a self-sustaining foreign subsidiary is to be its functional currency. The balance sheet for such subsidiaries is translated into the home currency using the exchange rate in effect at the end of the firm's financial year. The functional currency of an integral subsidiary is to be U.S. dollars.
75.
(p. 644)
Which of the following is typically not a main step in the control process by which a corporate headquarters controls subunits within the organization? A. Head office and subunit management jointly determine subunit goals for the coming year. B. Head office monitors subunit performance against the agreed goals only at the end of the year. C. If a subunit fails to achieve its goals, the head office intervenes in the subunit to learn why the shortfall occurred. D. If a subunit fails to achieve its goals, the head office can take appropriate corrective action if required. The control process involves three main steps: (1) Head office and subunit management jointly determine subunit goals for the coming year. (2) Throughout the year, the head office monitors subunit performance against the agreed goals. (3) If a subunit fails to achieve its goals, the head office intervenes in the subunit to learn why the shortfall occurred, taking corrective action when appropriate.
76.
Which among the following combinations of the Lessard-Lorange model is considered illogical and the budget using the projected rate and actual performance using the initial rate the budget using the initial rate and actual performance using the initial rate the budget and actual performance using the projected rate the budget and actual performance using the ending rate
(p. 645 - unreasonable? Figure 19.3 Possible Combin A. Translating ations of Exchange B. Translating Rates in C. Translating the Control Process) D. Translating
The following combinations are considered illogical and unreasonable in the Lessard-Lorange model: translating the budget using the initial rate and actual performance using the projected rate, translating the budget using the projected rate and actual performance using the initial rate, translating the budget using the ending rate and actual performance using the initial rate, and translating the budget using the ending rate and actual performance using the projected rate.
77.
(p. 645)
In which of the following combinations of the Lessard-Lorange model is it possible that the ending spot exchange rate used to evaluate performance against the budget might be quite different from the initial spot exchange rate used to translate the budget? A. B. C. D. II IE EE PP
In the case of II, PP, and EE the same exchange rate is used for translating both budget figures and performance figures into the corporate currency. All three combinations have the advantage that a change in the exchange rate during the year does not distort the control process.
78.
(p. 645)
Lessard and Lorange refer to company-generated forecasts of future spot rates as the: A. B. C. D. ending rate. future rate. domestic rate. internal forward rate.
The internal forward rate may differ from the forward rate quoted by the foreign exchange market if the firm wishes to bias its business in favor of, or against, the particular foreign currency.
79.
(p. 646)
Firms pursuing _____ business strategies disperse each value creation activity to its optimal location in the world. A. B. C. D. localization and transnational global and localization transnational and global localization and international
In transnational and global strategies a product might be designed in one country, some of its components manufactured in a second country, other components manufactured in a third country, all assembled in a fourth country, and then sold worldwide.
80.
(p. 646647)
Which of the following statements is true regarding assessing the performance of a foreign subsidiary and its managers? A. It is inappropriate to compare subsidiaries against each other on the basis of return on investment (ROI). B. Foreign subsidiaries operate in widely similar economic, political, and social conditions. C. Managers should be evaluated in local currency terms after making allowances for items over which they have no control. D. The evaluation of a subsidiary should be combined with the evaluation of its manager. It is legitimate to compare subsidiaries against each other on the basis of return on investment. Foreign subsidiaries do not operate in uniform environments. The evaluation of a subsidiary should be kept separate from the evaluation of its manager.
81.
(p. 632)
Describe accounting in international business. What is accounting information? Accounting has often been referred to as "the language of business." This language finds expression in profit-and-loss statements, balance sheets, budgets, investment analysis, and tax analysis. Accounting information is the means by which firms communicate their financial position to the providers of capital (investors, creditors, and government). It enables the providers of capital to assess the value of their investments or the security of their loans and to make decisions about future resource allocations. Accounting information is also the means by which firms report their income to the government so the government can assess how much tax the firm owes. It is also the means by which the firm can evaluate its performance, control its internal expenditures, and plan for future expenditures and income.
82.
(p. 632)
Identify a key accounting problem that international businesses are confronted with but that does not confront purely domestic businesses. Substantiate with a suitable example. International businesses are confronted with a number of accounting problems that do not confront purely domestic businesses. One of these problems is the lack of consistency in the accounting standards of different countries. For example, the accounting rules currently used in China are not the same as those used in more developed markets. This makes it very difficult for international investors to accurately value Chinese firms, and it opens up the possibility that firms that seem to be profitable and financially strong are in fact not.
83.
(p. 633)
What are the five main variables that influence the development of a country's accounting system? The five main variables that influence the development of a country's accounting system are: 1. The relationship between business and the providers of capital. 2. Political and economic ties with other countries. 3. The level of inflation. 4. The level of a country's economic development. 5. The prevailing culture in a country.
84.
(p. 633)
What is the relationship between business, providers of capital, and the development of a country's accounting system? The three main external sources of capital for business enterprises are individual investors, banks, and government. A country's accounting system tends to reflect the relative importance of these three constituencies as providers of capital. In the United States, for example, business firms can raise capital by selling shares and bonds to individual investors through the stock market and the bond market. They can also borrow capital from banks and, in rather limited cases, from the government. The importance of each source of capital varies from country to country. In some countries, such as the United States, individual investors are the major source of capital; in others, banks play a greater role; in still others, the government is the major provider of capital.
85.
(p. 634)
How is a country's accounting system affected by the providers of capital? Explain with the help of suitable examples. In both Great Britain and the United States, the financial accounting system is oriented toward providing individual investors with the information they need to make decisions about purchasing or selling corporate stocks and bonds. In countries such as Switzerland, Germany, and Japan, historically a few large banks satisfied most of the capital needs of business enterprises. Because banks are the major providers of capital, financial accounting practices are oriented toward protecting a bank's investment. Thus, assets are valued conservatively and liabilities are overvalued to provide a cushion for the bank in the event of default. In still other countries, the national government has historically been an important provider of capital, which has influenced accounting practices. For example, in France and Sweden the national government has often stepped in to make loans or to invest in firms whose activities are deemed in the "national interest." In these countries, financial accounting practices tend to be oriented toward the needs of government planners.
86.
(p. 635)
How do political and economic ties with other countries influence the development of a country's accounting system? Similarities in the accounting systems of countries are sometimes due to the countries' close political and/or economic ties. For example, the U.S. system has influenced accounting practices in Canada and Mexico, and since passage of NAFTA, the accounting systems in these three countries seem set to converge on a common set of norms. U.S.-style accounting systems are also used in the Philippines, which was once a U.S. protectorate. The vast majority of former colonies of the British Empire have accounting practices modeled after Great Britain's. Similarly, the European Union has been attempting to harmonize accounting practices in its member countries.
87.
(p. 635)
What is the historic cost principle? The historic cost principle assumes the currency unit used to report financial results is not losing its value due to inflation. Firms record sales, purchases, and the like at the original transaction price and make no adjustments in the amounts later. The historic cost principle affects accounting most significantly in the area of asset valuation. If inflation is high, the historic cost principle underestimates a firm's assets, so the depreciation charges based on these underestimates can be inadequate for replacing assets when they wear out or become obsolete. The appropriateness of this principle varies inversely with the level of inflation in a country.
88.
(p. 635)
Describe the current cost accounting system. The high level of price inflation in many industrialized countries during the 1970s and 1980s created a need for accounting methods that adjust for inflation. Great Britain adopted one of the most far-reaching approaches in 1980, called current cost accounting. This system adjusts all items in a financial statementassets, liabilities, costs, and revenuesto factor out the effects of inflation. The method uses a general price index to convert historic figures into current values.
89.
(p. 635)
Identify the reasons why accounting in developed countries tends to be far more sophisticated than it is in less developed countries. Developed nations tend to have large, complex organizations, whose accounting problems are far more difficult than those of small organizations. Developed nations also tend to have sophisticated capital markets in which business organizations raise funds from investors and banks. These providers of capital require that the organizations they invest in and lend to provide comprehensive reports of their financial activities. The workforces of developed nations tend to be highly educated and skilled and can perform complex accounting functions.
AACSB: Analytic Skills Bloom's: Comprehension Difficulty: Easy Hill - Chapter 19 #89 Learning Objective: 19-01
90.
(p. 636)
How does the culture of a country influence the nature of its accounting system? What is uncertainty avoidance? Researchers have found that the extent to which a culture is characterized by uncertainty avoidance seems to have an impact on accounting systems. Uncertainty avoidance refers to the extent to which cultures socialize their members to accept ambiguous situations and tolerate uncertainty. Research suggests that countries with low uncertainty avoidance cultures tend to have strong independent auditing professions that audit a firm's accounts to make sure they comply with generally accepted accounting regulations.
AACSB: Multicultural/Diversity Understanding Bloom's: Comprehension Difficulty: Medium Hill - Chapter 19 #90 Learning Objective: 19-01
91.
(p. 636)
What are auditing standards? How are they different from accounting standards? Auditing standards specify the rules for performing an auditthe technical process by which an independent person (the auditor) gathers evidence for determining if financial accounts conform to required accounting standards and if they are also reliable. Accounting standards are rules for preparing financial statements; they define what is useful accounting information.
92.
(p. 636637)
With the help of examples, differentiate between transnational financing and transnational investments. Transnational financing occurs when a firm based in one country enters another country's capital market to raise capital from the sale of stocks or bonds. A German firm raising capital by selling stock through the London Stock Exchange is an example of transnational financing. Transnational investment occurs when an investor based in one country enters the capital market of another nation to invest in the stocks or bonds of a firm based in that country. An investor based in Great Britain buying General Motors stock through the New York Stock Exchange would be an example of transnational investment.
93.
(p. 637638)
Write a short note on the International Accounting Standards Board (IASB)? The International Accounting Standards Board has emerged as a major proponent of standardization. The IASB was formed in March 2001 to replace the International Accounting Standards Committee, which had been established in 1973. The IASB has 14 members who are responsible for the formulation of new international financial reporting standards. By 2006 the IASB and its predecessor, the IASC, had issued around 45 international accounting standards. To issue a new standard, 75 percent of the 14 members of the board must agree. A hindrance to the development of international accounting standards is that compliance is voluntary; the IASB has no power to enforce its standards. Even so, support for the IASB and recognition of its standards has been growing. Increasingly, the IASB is regarded as an effective voice for defining acceptable worldwide accounting principles.
94.
(p. 639)
Highlight the role of the European Union (EU) in harmonization of accounting standards in the EU. In accordance with its plans for closer economic and political union, the European Union has mandated harmonization of the accounting principles of its member countries. The EU does this by issuing directives that the member states are obligated to incorporate into their own national laws. Because EU directives have the power of law, it has a better chance of achieving harmonization than the IASB does. The EU has required that from January 1, 2005 onward, financial accounts issued by some 7,000 publicly listed companies in the EU were to be in accordance with IASB standards.
95.
(p. 639)
What is a consolidated financial statement? What type of firms usually makes use of it? A consolidated financial statement combines the separate financial statements of two or more companies to yield a single set of financial statements as if the individual companies were really one. Most multinational firms are composed of a parent company and a number of subsidiary companies located in various other countries. Such firms typically issue consolidated financial statements, which merge the accounts of all the companies, rather than issuing individual financial statements for the parent company and each subsidiary.
96.
(p. 640641)
Why is it advantageous for firms to organize themselves as a set of separate legal entities? How do consolidated financial statements benefit these firms? Many firms organize themselves as a set of separate legal entities to limit its total legal liability or to take advantage of corporate tax regulations. Multinationals are often required by the countries in which they do business to set up a separate company. Thus, the typical multinational comprises a parent company and a number of subsidiary companies located in different countries, most of which are wholly owned by the parent. However, although the subsidiaries may be separate legal entities, they are not separate economic entities. The purpose of consolidated financial statements is to provide accounting information about a group of companies that recognize their economic interdependence.
97.
(p. 642)
Describe the current rate method used by firms to determine what exchange rate should be used when translating financial statement currencies. Under the current rate method, the exchange rate at the balance sheet date is used to translate the financial statements of a foreign subsidiary into the home currency of the multinational firm. Although this may seem logical, it is incompatible with the historic cost principle.
98.
(p. 642)
What is the temporal method used to translate the accounts of a foreign subsidiary? Explain with the help of an example. The temporal method translates assets valued in a foreign currency into the home-country currency using the exchange rate that exists when the assets are purchased. For example, a U.S. firm invests $100,000 in a Malaysian subsidiary. The exchange rate was of $1 = 5 ringgit, the rate on the day the Malaysian subsidiary purchased the land, would be used to convert the value of the land back into U.S. dollars at year-end. However, although the temporal method will ensure that the dollar value of the land does not fluctuate due to exchange rate changes, it has its own serious problem. Because the various assets of a foreign subsidiary will in all probability be acquired at different times and because exchange rates seldom remain stable for long, different exchange rates will probably have to be used to translate those foreign assets into the multinational's home currency. Consequently, the multinational's balance sheet may not balance.
99.
(p. 643)
Describe the Statement 52, whose requirements all U.S.-based multinational firms must follow. The Statement 52, "Foreign Currency Translation," was issued by the U.S. Financial Accounting Standards Board in 1981. Under Statement 52, a foreign subsidiary is classified either as a selfsustaining, autonomous subsidiary or as integral to the activities of the parent company. According to Statement 52, the local currency of a self-sustaining foreign subsidiary is to be its functional currency. The balance sheet for such subsidiaries is translated into the home currency using the exchange rate in effect at the end of the firm's financial year, whereas the income statement is translated using the average exchange rate for the firm's financial year. But the functional currency of an integral subsidiary is to be U.S. dollars. The financial statements of such subsidiaries are translated at various historic rates using the temporal method, and the dangling debit or credit increases or decreases consolidated earnings for the period.
100.
(p. 644645)
Describe the Lessard-Lorange Model. According to research by Donald Lessard and Peter Lorange, three exchange rates that can be used to translate foreign currencies into the corporate currency in setting budgets and in the subsequent tracking of performance. These were the initial rate, the projected rate, and the ending rate. Lessard and Lorange recommend that firms use the projected spot exchange rate to translate both budget figures and performance figures into the corporate currency. The projected rate in such cases will typically be the forward exchange rate as determined by the foreign exchange market or some company-generated forecast of future spot rates, which Lessard and Lorange refer to as the internal forward rate.
ch19 Summary
Category AACSB: Analytic Skills AACSB: Multicultural/Diversity Understanding Bloom's: Application Bloom's: Comprehension Bloom's: Knowledge Difficulty: Easy Difficulty: Hard Difficulty: Medium Hill - Chapter 19 Learning Objective: 19-01 Learning Objective: 19-02 Learning Objective: 19-03 Learning Objective: 19-04 Learning Objective: 19-05 # of Questions 96 4 3 50 47 24 13 63 100 38 12 11 22 17

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ch19

Accounting is shaped by the environment in which it operates. True False

40. Foreign subsidiaries operate in uniform environments. True False

87. What is the historic cost principle?

88. Describe the current cost accounting system.

100.Describe the Lessard-Lorange Model.

Accounting is shaped by the environment in which it operates. TRUE

Subunit goals are determined solely by the head office. FALSE

The balance sheet is the main instrument of financial control. FALSE

Foreign subsidiaries operate in uniform environments. FALSE

Different countries follow different accounting standards.

The treatment of goodwill varies based on a country's accounting standards.

Auditing standards specify the rules for performing an audit.

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