Question 1

Why do some small firms choose not to hedge transactions even though there may be a benefit from hedging?

Accepted Answer

A) They do not have the in-house expertise to enter into the proper hedging transactions. 
B) The cost of complying with accounting regulations related to hedging outweigh the benefits that might be gained from hedging. 
C) Small firms generally do not have enough at stake financially to allow them to deal with firms engaged in hedging. 
D) Creditors of small firms generally refuse to allow the firms to be involved in hedging transactions. 
A) They do not have the in-house expertise to enter into the proper hedging transactions. 
B) The cost of complying with accounting regulations related to hedging outweigh the benefits that might be gained from hedging. 
C) Small firms generally do not have enough at stake financially to allow them to deal with firms engaged in hedging. 
D) Creditors of small firms generally refuse to allow the firms to be involved in hedging transactions.

Question 2

How can MNCs benefit from using foreign tax credits?

Accepted Answer

Foreign tax credits generally allow an M

Question 3

When the income of an MNC is taxed and then the dividends that the MNC pays to investors are taxed,what is the impact on the MNC?

Accepted Answer

A) The MNC is not affected because it is not responsible for the taxes owed by its investors. 
B) The MNC's cost of capital is increased because the return to investors is decreased by the tax. 
C) The MNC has to reduce its taxable income to reduce the overall tax burden. 
D) The MNC's ability to raise capital is affected because investors are interested in the overall tax liability of the MNC. 
A) The MNC is not affected because it is not responsible for the taxes owed by its investors. 
B) The MNC's cost of capital is increased because the return to investors is decreased by the tax. 
C) The MNC has to reduce its taxable income to reduce the overall tax burden. 
D) The MNC's ability to raise capital is affected because investors are interested in the overall tax liability of the MNC.

Question 4

When a subsidiary of an MNC in a foreign country makes capital-related payments to the MNC,the country where that subsidiary is located may require that the:

Accepted Answer

A) subsidiary withhold taxes from the capital-related payment. 
B) subsidiary obtain permission from the country where it is located before it makes the payment. 
C) MNC guarantee the payment of any taxes due on the capital-related payment. 
D) government of the country where the MNC is located collect taxes on the capital-related payment. 
A) subsidiary withhold taxes from the capital-related payment. 
B) subsidiary obtain permission from the country where it is located before it makes the payment. 
C) MNC guarantee the payment of any taxes due on the capital-related payment. 
D) government of the country where the MNC is located collect taxes on the capital-related payment.

Question 5

If the foreign income tax rate is higher than the MNC's home-country tax rate:

Accepted Answer

A) the MNC pays no additional home-country income taxes on the subsidiary's income. 
B) the MNC will pay an additional income tax that is the differential between the tax rate of the foreign country and the tax rate of the MNC's home-country. 
C) the MNC's domestic income tax will be eliminated. 
D) the foreign subsidiary will pay no tax in the foreign country. 
A) the MNC pays no additional home-country income taxes on the subsidiary's income. 
B) the MNC will pay an additional income tax that is the differential between the tax rate of the foreign country and the tax rate of the MNC's home-country. 
C) the MNC's domestic income tax will be eliminated. 
D) the foreign subsidiary will pay no tax in the foreign country.

Question 6

If an MNC's home country allows it to deduct from its taxable income the income tax paid by its foreign subsidiary:

Accepted Answer

A) the MNC receives full credit for the foreign income tax paid by the subsidiary,and the effects of double taxation are eliminated. 
B) whether the MNC receives any relief from double taxation depends on the relative tax rates between the MNC's home country and the foreign country where the subsidiary operates. 
C) the MNC pays domestic income taxes on its income and on its subsidiary's after-tax income,and the effects of double taxation are reduced. 
D) the foreign subsidiary is relieved of an income tax burden,and the MNC will receive a large remittance of profits from its subsidiary. 
A) the MNC receives full credit for the foreign income tax paid by the subsidiary,and the effects of double taxation are eliminated. 
B) whether the MNC receives any relief from double taxation depends on the relative tax rates between the MNC's home country and the foreign country where the subsidiary operates. 
C) the MNC pays domestic income taxes on its income and on its subsidiary's after-tax income,and the effects of double taxation are reduced. 
D) the foreign subsidiary is relieved of an income tax burden,and the MNC will receive a large remittance of profits from its subsidiary.

Question 7

When a firm chooses to use a foreign currency as its functional currency,it translates its assets and liabilities into USD using the:

Accepted Answer

A) average exchange rate. 
B) forward exchange rate. 
C) exchange rate existing when the assets were acquired and the liabilities incurred. 
D) spot exchange rate. 
A) average exchange rate. 
B) forward exchange rate. 
C) exchange rate existing when the assets were acquired and the liabilities incurred. 
D) spot exchange rate.

Question 8

A hedge that attempts to protect the market value of a specific asset of a firm is called a:

Accepted Answer

A) asset protection hedge. 
B) market hedge. 
C) fair value hedge. 
D) cash flow hedge. 
A) asset protection hedge. 
B) market hedge. 
C) fair value hedge. 
D) cash flow hedge.

Question 9

What does transfer pricing mean in the context of the operations of MNCs?

Accepted Answer

Transfer pricing refers to the price at

Question 10

Modern accounting methods attempt to satisfy two requirements imposed by government regulation and investor interest:

Accepted Answer

A) expediency and propriety. 
B) accuracy and brevity. 
C) transparency and reliability. 
D) specificity and believability. 
A) expediency and propriety. 
B) accuracy and brevity. 
C) transparency and reliability. 
D) specificity and believability.

Question 11

How were derivative transactions originally recorded by corporations?

Accepted Answer

A) They were not recorded directly in a corporation's books and records but were reflected as off-balance sheet transactions. 
B) They were recorded as assets at their original costs,and the profit or loss was recorded when the derivatives were sold. 
C) They were recorded as assets at their original costs,and those costs were adjusted periodically to reflect gains or losses in value. 
D) They were not recorded as assets or liabilities until they matured and the profit or loss could be determined. 
A) They were not recorded directly in a corporation's books and records but were reflected as off-balance sheet transactions. 
B) They were recorded as assets at their original costs,and the profit or loss was recorded when the derivatives were sold. 
C) They were recorded as assets at their original costs,and those costs were adjusted periodically to reflect gains or losses in value. 
D) They were not recorded as assets or liabilities until they matured and the profit or loss could be determined.

Question 12

_________________ accounting is more reliable than other methods in predicting future cash flows.

Accepted Answer

A) Cash-based 
B) Accrual-based 
C) Future-based 
D) Historically-based 
A) Cash-based 
B) Accrual-based 
C) Future-based 
D) Historically-based

Question 13

Why is the value of many derivatives difficult to determine for accounting purposes?

Accepted Answer

A) Many derivative decline in value over time,so only average values can be determined. 
B) Many derivative fluctuate in value over time,so only average values can be determined. 
C) Many derivatives are controlled by governments,so the stated value of a derivative may not be its actual value. 
D) Many derivatives are private contracts for which there is no active market,so values are difficult to determine. 
A) Many derivative decline in value over time,so only average values can be determined. 
B) Many derivative fluctuate in value over time,so only average values can be determined. 
C) Many derivatives are controlled by governments,so the stated value of a derivative may not be its actual value. 
D) Many derivatives are private contracts for which there is no active market,so values are difficult to determine.

Question 14

The foreign taxes that an MNC can usually use as credits against its domestic income taxes include:

Accepted Answer

A) all foreign taxes paid by the MNC or its subsidiaries. 
B) only those taxes that the MNC pays directly. 
C) foreign corporate income taxes and foreign withholding taxes. 
D) only those taxes that are paid to countries approved by the home country of the MNC. 
A) all foreign taxes paid by the MNC or its subsidiaries. 
B) only those taxes that the MNC pays directly. 
C) foreign corporate income taxes and foreign withholding taxes. 
D) only those taxes that are paid to countries approved by the home country of the MNC.

Question 15

What can cause the taxable income of a firm to vary over time?

Accepted Answer

A) Technology and exchange rates 
B) Competition and economic cycles 
C) Tax rates and competition 
D) Tax credits and tax deductions 
A) Technology and exchange rates 
B) Competition and economic cycles 
C) Tax rates and competition 
D) Tax credits and tax deductions

Question 16

How does the concept of double taxation apply to MNCs?

Accepted Answer

If an MNC earns income in a foreign coun

Question 17

What generally happens to excess foreign tax credits that an MNC cannot use in the year that the foreign tax credits are created?

Accepted Answer

A) The unused foreign tax credits are lost. 
B) Foreign tax credits not used in the year that they are created can be generally be carried forward but not carried back to reduce tax liability in future years. 
C) Foreign tax credits not used in the year that they are created can generally be carried forward or carried back to reduce tax liabilities in other years. 
D) Foreign tax credits not used in the year that they are created can generally be carried back but not carried forward to reduce tax liability in previous years. 
A) The unused foreign tax credits are lost. 
B) Foreign tax credits not used in the year that they are created can be generally be carried forward but not carried back to reduce tax liability in future years. 
C) Foreign tax credits not used in the year that they are created can generally be carried forward or carried back to reduce tax liabilities in other years. 
D) Foreign tax credits not used in the year that they are created can generally be carried back but not carried forward to reduce tax liability in previous years.

Question 18

What approach to accounting reflects economic income better and appears to be more transparent?

Accepted Answer

A) Code law accounting 
B) Historical accounting 
C) Common law accounting 
D) Pro forma accounting 
A) Code law accounting 
B) Historical accounting 
C) Common law accounting 
D) Pro forma accounting

Question 19

Corporate functions that deal with accounting and taxes are generally referred to as:

Accepted Answer

A) controller functions. 
B) financial functions. 
C) financial controls. 
D) treasury functions. 
A) controller functions. 
B) financial functions. 
C) financial controls. 
D) treasury functions.

Question 20

The __________________ approach to taxation looks at each entity separately in determining tax liability and does not consider whether income has been previously taxed.

Accepted Answer

A) holistic 
B) composite 
C) integrated system 
D) separate entity 
A) holistic 
B) composite 
C) integrated system 
D) separate entity

Why do some small firms choose not to hedge transactions even though there may be a benefit from hedging?

How can MNCs benefit from using foreign tax credits?

When the income of an MNC is taxed and then the dividends that the MNC pays to investors are taxed,what is the impact on the MNC?

When a subsidiary of an MNC in a foreign country makes capital-related payments to the MNC,the country where that subsidiary is located may require that the:

If the foreign income tax rate is higher than the MNC's home-country tax rate:

If an MNC's home country allows it to deduct from its taxable income the income tax paid by its foreign subsidiary:

When a firm chooses to use a foreign currency as its functional currency,it translates its assets and liabilities into USD using the:

A hedge that attempts to protect the market value of a specific asset of a firm is called a:

What does transfer pricing mean in the context of the operations of MNCs?

Modern accounting methods attempt to satisfy two requirements imposed by government regulation and investor interest:

How were derivative transactions originally recorded by corporations?

_________________ accounting is more reliable than other methods in predicting future cash flows.

Why is the value of many derivatives difficult to determine for accounting purposes?

The foreign taxes that an MNC can usually use as credits against its domestic income taxes include:

What can cause the taxable income of a firm to vary over time?

How does the concept of double taxation apply to MNCs?

What generally happens to excess foreign tax credits that an MNC cannot use in the year that the foreign tax credits are created?

What approach to accounting reflects economic income better and appears to be more transparent?

Corporate functions that deal with accounting and taxes are generally referred to as:

The __________________ approach to taxation looks at each entity separately in determining tax liability and does not consider whether income has been previously taxed.

Introduction

International Financial Markets: Structure and Innovation

Currency and Eurocurrency Derivatives

Currency Systems and Valuation

Currency Parity Conditions

Currency Risk Exposure Measurement

Currency Exposure Management

Capital Budgeting

Advanced Capital Budgeting

Long-Term Financing

Optimizing and Financing Working Capital

International Alliances and Acquisitions

International Trade

International Portfolio Investments

Filters

Exam 14: International Taxation and Accounting

Why do some small firms choose not to hedge transactions even though there may be a benefit from hedging?

How can MNCs benefit from using foreign tax credits?

When the income of an MNC is taxed and then the dividends that the MNC pays to investors are taxed,what is the impact on the MNC?

When a subsidiary of an MNC in a foreign country makes capital-related payments to the MNC,the country where that subsidiary is located may require that the:

If the foreign income tax rate is higher than the MNC's home-country tax rate:

If an MNC's home country allows it to deduct from its taxable income the income tax paid by its foreign subsidiary:

When a firm chooses to use a foreign currency as its functional currency,it translates its assets and liabilities into USD using the:

A hedge that attempts to protect the market value of a specific asset of a firm is called a:

What does transfer pricing mean in the context of the operations of MNCs?

Modern accounting methods attempt to satisfy two requirements imposed by government regulation and investor interest:

How were derivative transactions originally recorded by corporations?

_________________ accounting is more reliable than other methods in predicting future cash flows.

Why is the value of many derivatives difficult to determine for accounting purposes?

The foreign taxes that an MNC can usually use as credits against its domestic income taxes include:

What can cause the taxable income of a firm to vary over time?

How does the concept of double taxation apply to MNCs?

What generally happens to excess foreign tax credits that an MNC cannot use in the year that the foreign tax credits are created?

What approach to accounting reflects economic income better and appears to be more transparent?

Corporate functions that deal with accounting and taxes are generally referred to as:

The __________________ approach to taxation looks at each entity separately in determining tax liability and does not consider whether income has been previously taxed.

Introduction

International Financial Markets: Structure and Innovation

Currency and Eurocurrency Derivatives

Currency Systems and Valuation

Currency Parity Conditions

Currency Risk Exposure Measurement

Currency Exposure Management

Capital Budgeting

Advanced Capital Budgeting

Long-Term Financing

Optimizing and Financing Working Capital

International Alliances and Acquisitions

International Trade

International Portfolio Investments

Filters