Potential problem in analyzing foreign financial statements

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Reference no: EM131215777

A major potential problem in analyzing foreign financial statements are the differences in accounting principles. As the book stated, there was a study done in 1990 creating a hypothetical company. With this hypothetical company, accounting principals were utilized from six different countries. The differences of the profits between the methods provided evidence of how drastic the different accounting methods are. The profits of this scenario ranged from -520 to 840. This study emphasizes the difficulties of analyzing and translating foreign statements. To help solve or at least help mitigate the issue, countries would either adopt IFRS or accounting methods similar to IFRS. This would help mitigate the drastic variances presented on financial statements. Any form of harmonization would create a scenario where these statements would be easier to compare, analyze and translate.

Do you think that the problem would be completely mitigated with IFRS? I ask because even within IFRS there is still a lot of leeway left for companies to apply the principles which could still lead to this issue. Do you think detailed notes could help with this?

Kindly, i need a response for this question regarding this particular paragraph

Reference no: EM131215777

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