Analyzing Foreign Financial Statements Essay Example | Topics and Well Written Essays - 750 words

Analyzing Foreign Financial Statements - Essay Example This poses a problem for financial analysts who do not have access to a copy of the organization’s annual report (American Institute of CPAs, 2010). Language poses another problem for analysts looking to analyze foreign financial statements. Numerous global organizations do not generate financial reports in English, making it hard for analyses with English as their native languages (American Institute of CPAs, 2010). For example, the financial record could remain illegible until a possible translator is hired for assistance. Conveniently, many multinationals present their financial statements in their native languages and English ones as well. A third problem is currency. Non-dollar-pegged countries have firms that release their financial statements in their local currencies (Musher, Wilkins, and Shulman, 2012). An analyst from the United States or a dollar-pegged nation would find it cumbersome to convert all entries into dollars for better analysis. Converting all balances at the exchange rate at the closing of the present fiscal year is tiresome, but a solution nonetheless (American Institute of CPAs, 2010). For example, fail ing to use the existing current exchange rate will distort the analyst’s work. To avoid distortion, analyzing the foreign financial statement using ratios improves the outcome irrespective of the currency applied (American Institute of CPAs, 2010). A third problem is terminology. Different countries use different words of the same language to compose their financial records. For instance, the United Kingdom usually uses the word turnover to refer to sales in the United States. In instances of convenience conversions, companies occasionally include terminology that English analysts are not used to (Musher et al., 2012). In this case, the analyst is forced to be versant with foreign trade and accounting diction to help alleviate this issue. For instance, in 2005, differences in the UK and US terminology in