Question

Based on the understanding of the causes of differences in accounting practice among contries, criticially evaluate whether the international differecnes in the formats of financial statements are a major obstacle to comparing the statement.

Answer 1

Need for comparision of international financial statement arises because of

1.international merger and acquisition

2.foriegn portfolio investment

3.comprision to international competitors

PROBLEMS

1. many international companies do not produce financial statements in English.
2. many international companies represent their financial statement in their home currencies.
3. difference in terminology exist between countries using same language.Example prefeered stock is called Preference shares in india.
4. difference in format.Example some countries right assets in the begining and liabilities at the top where as some countries right liabilities at top and assets at bottom.some countries dont show current and non current liabilities seperately whick makes difficult to determine short term and long term liabilities.
5. different countries closes their books of accounts on different days like in USA books of accounts are closed on 31st december whereas in india it is closed on 31st March.
6. different accounting principles are follow in different countries.

?Solutions

However most of the problems mentioned above can be solved by appointing a translator if it is prepared in foreign language.one can have idea about the local accounting standards.amount given in foreign currency can be converted into local currency into US Dollar on the reporting date.

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