Problems in the evaluation of foreign financial statements

There are certain problems in the evaluation of foreign financial statements that restricts the smooth running of business operations. The accessibility of data is a major challenge where financial information difficult in many countries. In addition, database of foreign financial statements contains errors and presenting in a variety of formats. Disclosure notes are not shown in the database. On the other hand, language is another issue where many international companies do not produce statements of financials in English. Therefore, English is the standard of language for easy convenience translations. Producing financial statements in another currency creates challenging work for the accountants to manage foreign financial statements. To avoid distortion in currency rates, the current exchange rate used for all previous years adequately. Analyzing using ratios for different currency avoid distortion. Different kind of terminologies used in analyzing foreign financial statements like inventory is used in US and stocks is used in the UK. Therefore, in-depth knowledge of business, as well as accounting environment with careful notes of financial statements, helps in alleviating the terminology problems.

Different countries used a different format for the execution of financial statements are problematic. In Europe amount of goods sold cost are not reported to prevent the analyst for the determination of gross profit margin. The extent of disclosure tends to be limited in internationally, whereas in US disclosure is a fundamental aspect. Lack of disclosure problems leads to format issues. The effects of globalization in capital markets enhance the disclosure of companies to attract the exposure of investors. Timeliness is another problem in analyzing foreign financial statements. The differences in accounting principles also lead inadequacy in foreign financial statements.

Do you think that financial analyst firms could solve some of these issues by employing specialists that specialize in specific countries’ financial statements? The specialists could be knowledgeable in the language, terminology, structure, and notes of the financial statements. Do you think it could be cost effective for the firm?

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