1. The primary difference between IAS 37, and U.S. GAAP concerning the treatment of contingent liabilities pertains to:

A) definition of terms.

B) measurement.

C) classification on the balance sheet.

D) disclosure of relevant information.

2. Why is it difficult to compare IAS 18, Revenue, to U.S. GAAP?

A) The IASB definition of revenue is very complicated, whereas the definition of revenue under U.S. GAAP is straightforward.

B) Revenue is not defined under U.S. GAAP.

C) There is no single standard in U.S. GAAP that deals solely with revenue.

D) Under U.S. GAAP, revenue is defined in terms of cash, whereas IAS 18 defines revenue in terms of a variety of resources.

3. The IASB standard on stock options (IFRS 2) is substantially the same as U.S. GAAP. How should stock options be accounted for?

A) Since their value is not determinable until a future date, they are not recorded, but only disclosed in the notes to the financial statements.

B) A compensation expense is recorded based on the value of the options expected to vest as of the date the options are granted.

C) An expense is recorded only if a market value for the options exists on the date the options are granted.

D) The options are recorded as a liability for the value of the stock at the exercise date.

4. Under IAS 19, with respect to the calculation of net pension expense (or revenue), which of the following components is NOT counted?

A) actual annual return on plan assets

B) current service cost

C) current period actuarial gains and losses

D) past service cost recognized in the current period

5. Under IAS 1, Presentation of Financial Statements, how must deferred taxes be classified on the balance sheet?

A) as either a current asset or a current liability

B) as always a noncurrent asset or a noncurrent liability

C) as either a current or noncurrent asset or liability based on the expected timing of realization

D) as a separately stated positive or negative component of equity

6. Under IAS 39, Financial Instruments: Recognition and Measurement, which of the following terms describes the removal of a financial asset or liability from the balance sheet when certain appropriate criteria have been met?

A) decoupling

B) extinguishment

C) derecognition

D) reversal

7. What has occurred when one company arranges to buy a foreign currency some time in the future, at an exchange rate quoted today?

A) The company has purchased a foreign currency option.

B) The company has entered a forward contract.

C) The currency has been devalued.

D) None of the above

8. What is a foreign currency transaction?

A) It is another name for an international transaction.

B) It is a transaction that involves payment at a date sometime in the future.

C) It is a business deal denominated in a currency other than a company's domestic currency.

D) It is an economic event measured in a currency other than U.S. dollars.

9. What is "hedge accounting?"

A) any record keeping related to purchase, sale, or valuation of derivatives

B) recording options and other derivatives on the Balance Sheet

C) matching gains or losses from hedging with losses or gains from the risk being hedged

D) using multiple accounting methods to offset the effect of foreign currency exchange

10. Which of the following is done when accounting for a cash flow hedge, but is not done when accounting for a fair value hedge?

A) The hedged asset or liability is adjusted to fair value.

B) Foreign exchange gains or losses on the hedged asset or liability are recorded in net income.

C) Increases or decreases in a derivative's fair value are recorded in accumulated other comprehensive income.

D) Gains or losses resulting from adjusting the fair value of a derivative are recorded in net income.

11. On December 1, 20x1 Pimlico made sales to a customer in India and recorded Accounts Receivable of 10,000,000 rupees. The customer has until March 1, 20x2 to pay. On December 1, 20x1, Pimlico paid $500 for a put option to sell rupees at a strike price of $2.30 per 100 rupees on March 1, 20x2, which was the spot rate on December 1, 20x1. On December 31, 20x1, the spot rate was $2.80 per 100 rupees and the option premium was $0.004 per 100 rupees.

What is the fair value of the option on December 1, 20x1?

A) $0

B) $500

C) $400

D) $10,000

12. King's Bank, a British company, purchases market research services from Harris Interactive, a U.S. company, for a contract price to be paid in U.S. dollars when the report is delivered three months later. How would King's Bank like to see the exchange rate move, assuming it isn't hedging the transaction.

A) It hopes that the U.S. dollar appreciates in value against the British pound.

B) It hopes that the British pound appreciates in value against the U.S. dollar.

C) It makes no difference, since they are the customer and the sale takes place in the U.K.

D) It hopes that there is no change between the spot rate and the forward rate.