Question 1

Translation exposure,

Accepted Answer

A) is not entity specific, rather it is currency specific. 
B) is not currency specific, rather it is entity specific. 
C) involves restatement from Italian to French. 
D) none of the above 
A) is not entity specific, rather it is currency specific. 
B) is not currency specific, rather it is entity specific. 
C) involves restatement from Italian to French. 
D) none of the above A

Question 2

When using the current/noncurrent method,current assets are defined as

Accepted Answer

A) inventory that is currently salable. 
B) assets with a maturity of one year or less. 
C) assets with a maturity of 90 days or less. 
D) none of the above 
A) inventory that is currently salable. 
B) assets with a maturity of one year or less. 
C) assets with a maturity of 90 days or less. 
D) none of the above B

Question 3

With regard to research on the stock price reaction to mandated accounting changes such as FASB 52

Accepted Answer

A) the results suggest that market participants seem to think that changes in reported earnings do not change the actual cash flows in multinational firms. 
B) the results suggest that market agents react to "cosmetic" earning changes. 
C) the results suggest that market agents do not react to cosmetic earning changes that do not affect value. 
D) none of the above 
A) the results suggest that market participants seem to think that changes in reported earnings do not change the actual cash flows in multinational firms. 
B) the results suggest that market agents react to "cosmetic" earning changes. 
C) the results suggest that market agents do not react to cosmetic earning changes that do not affect value. 
D) none of the above C

Question 4

Consider a U.S.-based MNC with manufacturing activities in Japan.The result of a change in the ¥-$ exchange rate on the assets and liabilities of the consolidated balance sheet is:   Ignoring transaction exposure in the yen,the translation exposure will indicate a possible need for a "balance sheet hedge" of

Accepted Answer

A) ¥200,000,000 more liabilities denominated in yen. 
B) ¥200,000,000 less assets denominated in yen. 
C) both a) or b) 
D) none of the above 
A) ¥200,000,000 more liabilities denominated in yen. 
B) ¥200,000,000 less assets denominated in yen. 
C) both a) or b) 
D) none of the above

Question 5

With regard to foreign currency translation methods used by foreign MNCs,

Accepted Answer

A) foreign currency translation methods are generally only used by U.S.-based MNCs since foreign firms have a built in hedge by being foreign. 
B) are generally the same methods used by U.S.-based firms. 
C) are exactly the same methods used by U.S.-based firms since GAAP is GAAP. 
D) none of the above are true statements. 
A) foreign currency translation methods are generally only used by U.S.-based MNCs since foreign firms have a built in hedge by being foreign. 
B) are generally the same methods used by U.S.-based firms. 
C) are exactly the same methods used by U.S.-based firms since GAAP is GAAP. 
D) none of the above are true statements.

Question 6

The International Accounting Standards Committee

Accepted Answer

A) is now known as The International Accounting Standards Board. 
B) is charged with accounting standards at the International House of Pancakes. 
C) includes many convicted felons among its members. 
D) all of the above 
A) is now known as The International Accounting Standards Board. 
B) is charged with accounting standards at the International House of Pancakes. 
C) includes many convicted felons among its members. 
D) all of the above

Question 7

Which of the following is a translation method where a "plug" equity account called cumulative translation adjustment is used?

Accepted Answer

A) Current/noncurrent method 
B) Current rate method 
C) Current/future method 
D) Short/long term method 
A) Current/noncurrent method 
B) Current rate method 
C) Current/future method 
D) Short/long term method

Question 8

How many methods of foreign currency translation have been used in recent years? (U.S.GAAP.)

Accepted Answer

A) One 
B) Two 
C) Three 
D) Four 
A) One 
B) Two 
C) Three 
D) Four

Question 9

The underlying principle of the temporal method is

Accepted Answer

A) assets and liabilities should be translated based on their maturity. 
B) monetary balance sheet accounts should be translated at the spot rate; nonmonetary accounts are translated at the historical rate in effect when the account was first recorded. 
C) monetary accounts are translated at the current exchange rate; other accounts are translated at the current exchange rate if they are carried on the books at current value; items carried at historical cost are translated at historic exchange rates. 
D) all balance sheet accounts are translated at the current exchange rate, except stockholders' equity. 
A) assets and liabilities should be translated based on their maturity. 
B) monetary balance sheet accounts should be translated at the spot rate; nonmonetary accounts are translated at the historical rate in effect when the account was first recorded. 
C) monetary accounts are translated at the current exchange rate; other accounts are translated at the current exchange rate if they are carried on the books at current value; items carried at historical cost are translated at historic exchange rates. 
D) all balance sheet accounts are translated at the current exchange rate, except stockholders' equity.

Question 10

Translation exposure,also frequently called accounting exposure,refers to the effect that an unanticipated change in exchange rates will have on the

Accepted Answer

A) choice of accounting methodology. 
B) consolidated financial reports of an MNC. 
C) firms competitive position. 
D) cash flows realized from foreign operations. 
A) choice of accounting methodology. 
B) consolidated financial reports of an MNC. 
C) firms competitive position. 
D) cash flows realized from foreign operations.

Question 11

Under FASB 52,when a net translation exposure exists,

Accepted Answer

A) a derivatives hedge is necessary to bring balance to the consolidated balance sheet after an exchange rate change. 
B) a money market hedge is necessary to bring balance to the consolidated balance sheet after an exchange rate change. 
C) a cumulative translation adjustment account is necessary to bring balance to the consolidated balance sheet after an exchange rate change. 
D) none of the above 
A) a derivatives hedge is necessary to bring balance to the consolidated balance sheet after an exchange rate change. 
B) a money market hedge is necessary to bring balance to the consolidated balance sheet after an exchange rate change. 
C) a cumulative translation adjustment account is necessary to bring balance to the consolidated balance sheet after an exchange rate change. 
D) none of the above

Question 12

The underlying principle of the current rate method is

Accepted Answer

A) assets and liabilities should be translated based on their maturity. 
B) monetary accounts have a similarity because their value represents a sum of money whose currency equivalent after translation changes each time the exchange rate changes. 
C) monetary accounts are translated at the current exchange rate; other accounts are translated at the current exchange rate if they are carried on the books at current value; items carried at historical cost are translated at historic exchange rates. 
D) all balance sheet accounts are translated at the current exchange rate, except for stockholders' equity.A "plug" equity account named cumulative translation adjustment (CT
A)  is used to make the balance sheet balance, since translation gains or losses do not go through the income statement according to this method. 
A) assets and liabilities should be translated based on their maturity. 
B) monetary accounts have a similarity because their value represents a sum of money whose currency equivalent after translation changes each time the exchange rate changes. 
C) monetary accounts are translated at the current exchange rate; other accounts are translated at the current exchange rate if they are carried on the books at current value; items carried at historical cost are translated at historic exchange rates. 
D) all balance sheet accounts are translated at the current exchange rate, except for stockholders' equity.A "plug" equity account named cumulative translation adjustment (CT
A)  is used to make the balance sheet balance, since translation gains or losses do not go through the income statement according to this method.

Question 13

The sensitivity of the firm's consolidated financial statements to unexpected changes in the exchange rate is

Accepted Answer

A) transaction exposure. 
B) translation exposure. 
C) economic exposure. 
D) none of the above 
A) transaction exposure. 
B) translation exposure. 
C) economic exposure. 
D) none of the above

Question 14

The underlying philosophy of the monetary/nonmonetary method is that

Accepted Answer

A) monetary accounts have a similarity because their value represents a sum of money whose currency equivalent after translation is independent of exchange rate changes. 
B) monetary accounts have a similarity because their value represents a sum of money whose currency equivalent after translation changes each time the exchange rate changes. 
C) assets and liabilities should be translated based on their maturity 
D) most income statement items are translated at the average exchange rate for the period.Depreciation and cost of goods sold, however, are translated at historical rates if the associated balance sheet accounts are carried at historical costs. 
A) monetary accounts have a similarity because their value represents a sum of money whose currency equivalent after translation is independent of exchange rate changes. 
B) monetary accounts have a similarity because their value represents a sum of money whose currency equivalent after translation changes each time the exchange rate changes. 
C) assets and liabilities should be translated based on their maturity 
D) most income statement items are translated at the average exchange rate for the period.Depreciation and cost of goods sold, however, are translated at historical rates if the associated balance sheet accounts are carried at historical costs.

Question 15

A translation exposure report shows,for each account that is included in the consolidated balance sheet,

Accepted Answer

A) the amount of foreign exchange exposure that exists for each foreign subsidiary in which the MNC has a material interest. 
B) the amount of foreign exchange exposure that exists on a net basis for the firm. 
C) the amount of foreign exchange exposure that exists for each foreign currency in which the MNC has exposure. 
D) none of the above 
A) the amount of foreign exchange exposure that exists for each foreign subsidiary in which the MNC has a material interest. 
B) the amount of foreign exchange exposure that exists on a net basis for the firm. 
C) the amount of foreign exchange exposure that exists for each foreign currency in which the MNC has exposure. 
D) none of the above

Question 16

The current/noncurrent method of foreign currency translation was generally accepted in the United States from the 1930s until 1975,when

Accepted Answer

A) FASB 2 became effective. 
B) FASB 4 became effective. 
C) FASB 6 became effective. 
D) FASB 8 became effective. 
A) FASB 2 became effective. 
B) FASB 4 became effective. 
C) FASB 6 became effective. 
D) FASB 8 became effective.

Question 17

FASB 8

Accepted Answer

A) required taking foreign exchange gains or losses through the income statement. 
B) caused reported earnings to fluctuate substantially from year to year. 
C) ran into acceptance problems from the accounting profession and MNCs. 
D) all of the above 
A) required taking foreign exchange gains or losses through the income statement. 
B) caused reported earnings to fluctuate substantially from year to year. 
C) ran into acceptance problems from the accounting profession and MNCs. 
D) all of the above

Question 18

The stated objectives of FASB 52 are

Accepted Answer

A) to provide information that is generally compatible with the expected economic effects of a rate change on an enterprise's cash flows and equity. 
B) to reflect in consolidated statements the financial results and relationships of the individual consolidated entities as measured in their functional currencies in conformity with U.S.generally accepted accounting principles. 
C) both a) and b) 
D) none of the above 
A) to provide information that is generally compatible with the expected economic effects of a rate change on an enterprise's cash flows and equity. 
B) to reflect in consolidated statements the financial results and relationships of the individual consolidated entities as measured in their functional currencies in conformity with U.S.generally accepted accounting principles. 
C) both a) and b) 
D) none of the above

Question 19

Translation exposure refers to

Accepted Answer

A) accounting exposure. 
B) the effect that an unanticipated change in exchange rates will have on the consolidated financial reports of an MNC. 
C) the change in the value of a foreign subsidiaries assets and liabilities denominated in a foreign currency, as a result of exchange rate change fluctuations, when viewed from the perspective of the parent firm. 
D) all of the above 
A) accounting exposure. 
B) the effect that an unanticipated change in exchange rates will have on the consolidated financial reports of an MNC. 
C) the change in the value of a foreign subsidiaries assets and liabilities denominated in a foreign currency, as a result of exchange rate change fluctuations, when viewed from the perspective of the parent firm. 
D) all of the above

Question 20

When using the current/noncurrent method,

Accepted Answer

A) most income statement items are translated at the average exchange rate for the accounting period. 
B) revenue and expense items that are associated with noncurrent assets or liabilities are translated at the historical rate that applies to the applicable balance sheet items. 
C) depreciation expense is translated at the historical rate that applies to the applicable depreciable asset items. 
D) all of the above 
A) most income statement items are translated at the average exchange rate for the accounting period. 
B) revenue and expense items that are associated with noncurrent assets or liabilities are translated at the historical rate that applies to the applicable balance sheet items. 
C) depreciation expense is translated at the historical rate that applies to the applicable depreciable asset items. 
D) all of the above

Translation exposure,

When using the current/noncurrent method,current assets are defined as

With regard to research on the stock price reaction to mandated accounting changes such as FASB 52

With regard to foreign currency translation methods used by foreign MNCs,

The International Accounting Standards Committee

Which of the following is a translation method where a "plug" equity account called cumulative translation adjustment is used?

How many methods of foreign currency translation have been used in recent years? (U.S.GAAP.)

The underlying principle of the temporal method is

Translation exposure,also frequently called accounting exposure,refers to the effect that an unanticipated change in exchange rates will have on the

Under FASB 52,when a net translation exposure exists,

The underlying principle of the current rate method is

The sensitivity of the firm's consolidated financial statements to unexpected changes in the exchange rate is

The underlying philosophy of the monetary/nonmonetary method is that

A translation exposure report shows,for each account that is included in the consolidated balance sheet,

The current/noncurrent method of foreign currency translation was generally accepted in the United States from the 1930s until 1975,when

FASB 8

The stated objectives of FASB 52 are

Translation exposure refers to

When using the current/noncurrent method,

Globalization and the Multinational Firm

International Monetary System

Balance of Payments

Corporate Governance Around the World

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

Futures and Options on Foreign Exchange

Management of Transaction Exposure

Management of Economic Exposure

International Banking and Money Market

International Bond Market

International Equity Markets

Interest Rate and Currency Swaps

International Portfolio Investment

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

International Trade Finance

International Tax Environment and Transfer Pricing

Filters

Exam 10: Management of Translation Exposure

Translation exposure,

When using the current/noncurrent method,current assets are defined as

With regard to research on the stock price reaction to mandated accounting changes such as FASB 52

With regard to foreign currency translation methods used by foreign MNCs,

The International Accounting Standards Committee

Which of the following is a translation method where a "plug" equity account called cumulative translation adjustment is used?

How many methods of foreign currency translation have been used in recent years? (U.S.GAAP.)

The underlying principle of the temporal method is

Translation exposure,also frequently called accounting exposure,refers to the effect that an unanticipated change in exchange rates will have on the

Under FASB 52,when a net translation exposure exists,

The underlying principle of the current rate method is

The sensitivity of the firm's consolidated financial statements to unexpected changes in the exchange rate is

The underlying philosophy of the monetary/nonmonetary method is that

A translation exposure report shows,for each account that is included in the consolidated balance sheet,

The current/noncurrent method of foreign currency translation was generally accepted in the United States from the 1930s until 1975,when

FASB 8

The stated objectives of FASB 52 are

Translation exposure refers to

When using the current/noncurrent method,

Globalization and the Multinational Firm

International Monetary System

Balance of Payments

Corporate Governance Around the World

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

Futures and Options on Foreign Exchange

Management of Transaction Exposure

Management of Economic Exposure

International Banking and Money Market

International Bond Market

International Equity Markets

Interest Rate and Currency Swaps

International Portfolio Investment

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

International Trade Finance

International Tax Environment and Transfer Pricing

Filters