Using foreign financial statements Article Example | Topics and Well Written Essays - 750 words

Using foreign financial statements - Article Example The article is about a very important field in contemporary financial world,the skills' requirements to read financial statements of foreign companies and extracting information of interest from these financialsThe article presents some techniques that organizations usually employ when their financial statements are provided to foreign users. This ranges from doing nothing (in which case the financial statements might be in non-English language with figures shown in local currency and might not follow Generally Accepted Accounting Principles - GAAP, or International Financial Reporting Standards - IFRS) to a completely new set of statements, explicitly prepared for United States. Known as secondary statements, these are developed to provide statements in United States English, with the use of either US GAAP or international standards on Accounting. The purpose is to give users a similar sort of statement that they are used to deal with in United States.The article moves on to identif y the differences in financial statements' presentation layout and style that might appear in financial statements of a foreign company based on its particular location, usage of accounting standards, and norms in the country. A CPA or financial analyst must be equipped with relevant skills and necessary expertise to be able to deal with these differences in the financial statements presentations.... The article, too, describes the importance of being able to read and understand the financial statements of a foreign firm. Similarly, as per CON 2, the information that should be provided in financial statements should have a comparability aspect; that is, it could be compared with information from other entities to make an informed decision. As noted in the article, one of the purposes of developing a secondary statement is to enable the readers to compare statements of one company in one country with statements of others that might be in some other countries. If the currency, form and presentation, and standards of which the financial statements are developed are similar, it will provide an ease in comparing apple to apple. Otherwise, one might end up comparing US Dollars with Japanese Yen. Similarly, other elements of the coursework like financial accounting environment, financial statements like balance sheet and income statements and their forms, and the reporting standards are discussed in the article with a perspective of foreign financial statements and international reporting. 3. Learning Lessons The article provides common approaches the companies take when they provide their financial statements to foreign users. These approaches include doing nothing (explained above), developing primary statements using United States GAAP, translating the financial statements into English for easy reading, some might also change the currency to US dollars to provide the ease of comparability that might be required (convenience statements), others might include the details of this conversion and show the rate at which currency is converted (limited restatement). In addition, companies might completely redo their statements to align these