How Foreign Companies Accommodate North American Investors

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Although financial statements from foreign countries may be difficult to read and interpret, there are ways they attempt to make them more user-friendly to North American investors. There are three main hindrances in understanding a foreign country’s financial statement. These are the language, the monetary unit and accounting principles used.

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The simplest way to overcome these hindrances is by using convenience translations which can take on many forms. It is most helpful when all three areas are translated. The conversion of the monetary unit and language may prove effective but only to a certain extent. Not only that, these statements can be deceiving if the readers isn’t well-versed in the accounting principles of that particular country. Without the translation of accounting principles, the financial statements will remain difficult to decipher as well as largely incomparable to the financial statements of U.S. companies.

International Accounting Standards Board (IASB)

This board is comprised of more than seventy-five countries throughout the world. It is the institution responsible for the standards and format for accounting and financial reporting worldwide. Most methods used by the IASB resemble the GAAP of the United States. In 2007, the Securities and Exchange Commission began permitting foreign companies to use the IASB GAAP in U.S. markets. Whereas previously, they had been required to present only in the form of the U.S. GAAP.