Section 482 requires transactions between commonly controlled entities to be carried out at __________________ prices.
Arm's length
The ________________ method is generally considered to provide the most reliable measure of arm's-length price when a comparable uncontrolled transaction exists
Comparable uncontrolled price
Which is not one of the five specified methods to determine arm's length price in a sale of tangible property?
a. Resale price method
b. Cost-plus method
c. Comparable controlled price method
Profit split method
Comparable controlled price method
Which group has negotiated the greatest number of advance pricing agreements with the U.S Internal Revenue Service (IRS)?
a. Foreign parent companies with branches and subsidiaries in the United States
b. U.S parent companies with branches and subsidiarie
Foreign parent companies with branches and subsidiaries in the United States
T/F: Advance pricing agreements (APA's) are agreements between a company and a national tax authority on what is an acceptable transfer pricing method. So long as the agreed-on method is used, the company's transfer will not be adjusted.
True
The APA process does not consist of:
a. Application
b. Due diligence
c. Negotiation
d. Analysis
Negotiation
This method determines whether or not the amount a company charges a related party for the use of intangible property is an arm's length price by referring to the amount it charges an unrelated party for the use of the intangible.
a. Comparable uncontroll
Comparable uncontrolled transaction
The IRS acknowledges that application of a specific transfer pricing method could result in a number of transfer prices, thereby creating an __________ of prices?
a. Higher price range
b. Further range
c. Arm's-length range
d. Transfer price range
Arm's length range
A _________ rule exists when the loan is denominated in U.S dollars and the lender is not regularly engaged in the business of making loans to unrelated persons.
a. Safe hous
b. Safe harbor
c. Safe haven
d. Safe way
Safe harbor
What do you call selling goods and services to a foreign subsidiary?
a. Downstream sale
b. Sale
c. Downsizing
d. Shipping
Downstream sale
The most well-known use of discretionary transfer pricing is to minimize world-wide income taxes by recording profits in ____________.
Lower-tax country
T/F: To maximize costs, top managers must dictate a discretionary transfer price
False
Which method assumes the buyer and seller are one unit?
a. Comparable profits
b. Profit split method
c. Resale price method
d. Cost-plus method
Profit split method
In a survey of 877 MNC's located in 25 different countries, Ernst & Young found the percentages of companies using the resale price method were
a. 30%
b. 27%
c. 23%
d. 12%
12%
Which of these is not a factor that the Treasury Regulations lists as relevant in determining whether an uncontrolled transaction is comparable?
a. Level of the market
b. Foreign currency risk
c. Comparable prices
d. Geographic market in which transaction
Comparable prices
The risks associated with local tax authorities scrutinizing a company's transfer prices are:
a. Penalties and interest on overdue tax
b. Uncertainty as to the group's worldwide tax burden
c. Problems in relationships with local tax authorities
d. All of
All of the above
Worldwide, there are certain types of transfers and certain industries that are more at risk for examination by tax authorities. For example, imports are more likely to be scrutinized than exports, partly for
a. Tax reasons
b. Political reasons
c. Popular
Political reasons
There are several red flags that can cause a tax authority to examine a company's transfer prices. The most important of these is if the company is
a. Less profitable than the tax authority believes it should be
b. Most profitable than the tax authority b
Less profitable than the tax authority believes it should be
The stated interest rate is considered to be at arm's length if it is at a rate not less than the "applicable federal rate" and not greater than ___________ of the applicable federal rate?
a. 105%
b. 130%
c. 140%
d. 115%
130%
Which confirmed with an IRS transfer pricing adjustment, a taxpayer may request assistance from the U.S Competent Authority through its ______________ to obtain correlative relief from the foreign government
a. Mutually beneficial agreement
b. Mutual agre
Mutual agreement procedure
A penalty equal to ___________ of the underpayment in taxes may be levied for a substantial valuation misstatement.
a. 40%
b. 35%
c. 10%
d. 20%
20%
Which is not a cost-minimization objective?
a. Avoidance of withholding taxes
b. Minimization of foreign accounts
c. Minimization of tariffs
Minimization of foreign accounts
T/F: Countries generally assess tariffs on the value of goods being imported into the country
True
T/F: Prices that would be charged between independent parties in the same circumstances is said to be made at _________________.
Arm's length prices
What happens when a price is accepted by a country but disallowed by another
a. War
b. Disablement
c. Double-taxation
d. Miscommunication
Double-taxation
Items that affect the performance measure over which the local manager has no control or it is not permitted to attempt to manage
Uncontrollable items
The function of ensuring that an organization's strategies are implemented, and goals are attained
Management control
Refers to issues concerning the condition of the host country economy
Economic risk
Refers to the issue of how a firm should appear to its customers in order to succeed financially
Customer prospective
Wether the translation adjustment should be included in the measurement of profit
Corollary issue
Are those measures of performance that are based on accounting information. They include sales growth, cost reduction, profit, and return on investment
Financial measures
A unit that has almost complete local responsibility for the creation of relevant know-how in the local context can be described as this
Local innovator
Subsidiaries also take responsibility for creating knowledge in specific areas that other units can use
Integrated player
Refers to how the firm will sustain its ability to change and improve in order to achieve its vision
Learning perspective
Refers to the possibility that political events within a host country can adversely affect cash flow to be derived from an investment in that country
Political risk
Are grand plans that reflect the future direction of the organization as determined by senior management
Strategies
When an MNC focuses on producing products for the parent company market, its organizational structure can be described as ___________.
Ethnocentric
Is the process of deciding on the goals of the organization and the strategies for attaining those goals
Strategy formulation
Refers to the process by which managers influence other members of the organization to behave in accordance with the organization's goals
Strategy implementation
Refers to the possibility of loss due to unexpected changes in currency values
Financial risk
Subsidiaries in this case operate as strategic business units. The structure of such a firm can be described as ________
Polycentric
In contrast, a unit may engage in little knowledge creation of its own and rely heavily on knowledge inflows from the parent or peer subsidiaries. Such a unit can be described as an _____________
Implementer
Some firms have a global networked structure, which supports both product line and geographic divisions in order to meet changing market demands. Such a structure can be described as ___________
Geocentric
Is about monitoring an organization's effectiveness in fulfilling its objectives. It is a key management control task
Performance evaluation
As those measures of performance that are based on information not obtained directly from financial statements
Nonfinancial measures
Refers to the issue of how a firm should appear to its shareholders in order to succeed financially
Financial perspective
Refers to the business processes at which the firm must excel in order to satisfy its shareholders and customers
Internal business process perspective
Suggests that costs, revenues, assets, and liabilities should be traced to the individual manager who is responsible for them
Responsibility accounting
Similar to transaction exposure, refers to the risk that changes in exchange rates will have a negative impact on an entity's cash flows
Economic exposure
A country's ____________ structure seems to be a major factor that determines the purpose of external auditing
Corporate governance
The revised Code of Ethic for Professional Accountants was issued by ________________
The Auditing Practices Board
The purpose of _____ was to "provide guidance to auditors on the form and content of the auditor's report issued in connection with the independent audit of the financial statements of any entity.
ISA 13
In 2005, at the international level, _____________________ was formed to oversee the work of IFAC committees.
Public theory and stakeholder theory
_______________ provides assurance to financial statement users that the information contained in those statements is high quality
External auditing
Statutory cap is used as an approach to ___________________
Limit auditor's ability
European firms use the _____________ according to the Federation des Experts Comptables Europeens
Conceptual approach
________________ is a segment of accounting that uses the basic techniques and methods of auditing and functions as an appraisal activity established within an entity
Internal auditing
The role of internal auditing is determined by __________________
Management
The Foreign Corrupt Practices Act (FCPA) requires companies to establish and maintain appropriate internal control systems so that corporate funds are not improperly used for __________________
Illegal purposes
External auditors are normally required to make an assessment of the _________________
Internal control