1. Chapter 9 Analysis of Foreign Fi

1. Chapter 9 Analysis of Foreign Financial Statements
2. Analysis of Foreign Financial Statements
Chapter Topics
Reasons for analyzing foreign financial statements.
Problems encountered in analyzing foreign financial statements.
Possible solutions to problems encountered in analyzing foreign financial statements.
Restating foreign financial statements to U.S. GAAP illustrated.
3. Reasons to Analyze Foreign Financial Statements
Foreign portfolio investment
Investors can diversify away some risk by investing internationally.
While stock returns in many countries are positively correlated with U.S. returns, these correlations are far from perfect.
4. Reasons to Analyze Foreign Financial Statements
International mergers and acquisitions
The frequency and size of international corporate mergers has increased in recent years.
Examples include Daimler/Chrysler and acquisitions by Ford Motor such as Volvo (of Sweden).
The purchaser of an international company needs to analyze the target company’s financial statements to determine the acquisition price.
5. Reasons to Analyze Foreign Financial Statements
Other reasons
Extending credit for foreign customers.
Evaluating foreign vendors.
Comparisons to international competitors.
6. Foreign Financial Statement Analysis – Problems
Data accessibility
Relative to the U.S., financial information is difficult to obtain in many countries.
While databases of foreign financial statements do exist, these can contain errors and present information in a variety of formats.
These databases also do not contain complete disclosure notes.
Another approach is to obtain a copy of the foreign company’s annual report.
7. Foreign Financial Statement Analysis – Problems
Language
Many international companies do not produce financial statements in English .
The financial statement user could hire a translator or develop foreign language capability.
Since English is the language of business, companies in many foreign countries produce convenience translations of their financial statements in English.
8. Foreign Financial Statement Analysis – Problems
Currency
Many international companies produce their financial statements in a currency other than the U.S. dollar .
These can be converted to U.S. dollars by translating all balances at the exchange rate at the end of the current year.
In order to avoid distortions, the current exchange rate should be used for all previous years.
Analysis using ratios is not distorted by different currencies-
Thus currency differences are usually a minor problem .
9. Foreign Financial Statement Analysis – Problems
Terminology
Differences in terminology exist between countries using the same language.
For example, sales in the U.S. is normally called turnover in the UK.
In cases of convenience translations, sometimes these include terminology unfamiliar to English speakers.
Knowledge of the business and accounting environment can help alleviate some of these problems.
10. Foreign Financial Statement Analysis – Problems
Format
Some format differences are not problematic because the information is given, just in a different place.
However, other format differences are a problem because the information is not provided .
Example: It is common in Europe to not provide cost of good sold.
This prevents an analyst from determining gross margin percentage and inventory turnover.
11. Foreign Financial Statement Analysis – Problems
Format
Another example: German and other continental European companies often do not distinguish between current and noncurrent liabilities .
This makes it difficult or impossible to compute a current ratio.
12. Foreign Financial Statement Analysis – Problems
Extent of disclosure
Disclosure internationally tends to be limited compared to the U.S. where full disclosure is fundamental.
Some of the most serious disclosure limitations are information on segments, asset valuation, foreign operations, interim statements, and reserves .
Globalization of capital markets tends to enhance disclosure as companies attempt to attract investors.
13. Foreign Financial Statement Analysis – Problems
Timeliness
Timeliness is one aspect of the relevance of information.
This varies significantly internationally since filing deadlines differ from country to country.
Among developed countries, the U.S. and Canada are the most timely whereas continental Europe is the least .
Requirements about the frequency of information also vary internationally from quarterly to annual reporting.
There is very little investors can do to overcome these problems.
14. Foreign Financial Statement Analysis – Problems
Differences in accounting principles
Differences in accounting principles often result in significantly different income and other financial statement amounts.
Some of the biggest problem areas are consolidations, fixed asset valuation and depreciation, and goodwill .
15.
Global context plays a big role in the degree of accounting differences and flexibility.
Examples:
Germany- tax/reporting tied together.
UK: “True and Fair View”
USA-Prescriptive rule-based standards (leases, pensions, etc.)
16. Foreign Financial Statement Analysis – Possible Solutions
Differences in accounting principles
Possible solutions:
Reframe foreign financial statements to a more familiar GAAP.
Use a stripped down measure of earnings that excludes items most affected by diversity.
Invest using macro indicators and diversification to reduce increased information risk.
Learn the local GAAP and business environment- then use the statements as published.
17. The impact on Financial Statement Analysis of Efforts to Harmonize Accounting Differences
As the use of the new IFRSs becomes more widespread, many of these problems will likely abate .
However, even if perfectly adopted, IFRSs, as currently formulated, cannot fully eliminate the increased information risk of international investment.
Example: Japan business forms and consolidation accounting. Consolidation accounting codified into IFRSs was developed to address US/UK entity issues, not those that developed in different cultures around the pacific rim.
18. Foreign Financial Statement Analysis – Interpretation of accounting ratios.
Business environment differences
Differences in culture and economic environments have an impact on the relevance of ratios. Knowing about these differences is crucial when investing internationally.
A study of companies in Japan, Korea, and the U.S. found significant differences due to business environment.
For example, Japanese and Korean companies borrow much more on a short-term basis than U.S. companies, leading to lower current ratios.
19. Foreign Financial Statement Analysis – Interpretation of Accounting ratios
Business environment differences
Debt ratios also tend to be higher in Japan and Korea because of government-sanctioned sources of financing.
Lower profit margins in Japan, relative to U.S., can be partly explained by those companies focus on market share as opposed to profits.
In summary, an investor needs to be aware of these differences and not forgo potentially profitable (long-term) investments.
20. Restating Foreign Financial Statements to U.S. GAAP
Form 20-F
Foreign companies that file non-U.S. GAAP financial statements with the SEC are required to complete a Form 20-F.
The Form 20-F reconciles net income and stockholders’ equity to U.S. GAAP.
However, there is no requirement to reconcile assets and liabilities.
In essence, this represents a partial restatement from foreign GAAP to U.S. GAAP.
21. Restating Foreign Financial Statements to U.S. GAAP
Form 20-F
Some ratios, such as return on equity, can be computed as if under U.S. GAAP.
Most other ratios, however, cannot be computed as if under U.S. GAAP.
The analyst can overcome this by performing the restatement of financial statement items.
22. Restating Foreign Financial Statements to U.S. GAAP
Restatement overview – Step one of two
The first step, reformatting, involves transforming the financial statements into a U.S. format.
This involves transformation of:
terminology differences,
presentation differences, and
Item definitions and classifications.
23. Restating Foreign Financial Statements to U.S. GAAP
Restatement overview – Step two
The second step involves restating the foreign GAAP amounts to U.S. GAAP amounts.
This process is made easier when the company files a Form 20-F.
Sometimes, companies will present a similar reconciliation without actually filing the Form 20-F.
In any case, notes to the financial statements are very useful in completing this step.
24. Restating Foreign Financial Statements to U.S. GAAP
Step one mechanics – Reformatting
Begin with setting up a four column worksheet in U.S. GAAP format.
Columns are foreign GAAP, debits, credits, and U.S. GAAP. Amounts are presented in original currency.
Prepare worksheets for income statement, statement of retained e

ผลลัพธ์ (สวาฮิลี) 1:

1. Sura ya 9 Uchambuzi wa Mambo ya Nje Taarifa za Fedha
2. Uchambuzi wa Taarifa za Fedha za kigeni
Sura Topics
Sababu kwa ajili ya kuchambua Nje Taarifa za Fedha.
Matatizo yaliyojitokeza katika kuchambua Nje Taarifa za Fedha.
Inawezekana Solutions kwa matatizo yaliyojitokeza katika kuchambua Nje Taarifa za Fedha.
restating Nje Taarifa za Fedha ya Marekani GAAP michoro.
3. Sababu ya Kuchambua Taarifa za Fedha za kigeni
Uwekezaji ya Nje Portfolio
Wawekezaji Je Away mseto hatari kwa kuwekeza baadhi kimataifa.
Wakati Stock Returns katika nchi nyingi ni vyema uhusiano na Marekani anarudi, mahusiano haya ni Mbali na Perfect.
4. Sababu ya Kuchambua Nje Taarifa za Fedha
muunganiko wa Kimataifa na Acquisitions
frequency na ukubwa wa International Corporate muunganiko imeongezeka katika miaka ya hivi karibuni.
Mifano ni pamoja na Daimler / Chrysler na Acquisitions na Ford Motor Kama vile Volvo (ya Sweden).
mnunuzi wa Kampuni ya Kimataifa ya Mahitaji ya. kuchambua Kampuni Target Taarifa za Fedha ya kuamua Price Upataji.
5. Sababu ya Kuchambua Nje Taarifa za Fedha
Sababu nyingine
Kutoa Mikopo kwa ajili ya wateja ya Nje.
Tathmini ya wachuuzi Nje.
Kulinganisha na washindani International.
6. Nje Financial Statement Uchambuzi - Matatizo
Takwimu Accessibility
Jamaa na Marekani, habari Financial ni Vigumu Kupata katika nchi nyingi.
Wakati database ya Nje Taarifa za Fedha zipo, hizi Je vyenye Makosa na Habari za sasa katika aina ya muundo.
database hizi pia kufanya Si. kamili Disclosure Notes vyenye.
Njia nyingine ni kupata nakala ya ripoti ya Kampuni ya Nje Mwaka.
7. Nje Financial Statement Uchambuzi - Matatizo
lugha
. Wengi makampuni International hawana kuzalisha Taarifa za Fedha katika lugha ya Kiingereza
. Financial Statement mtumiaji anaweza Hire translator au Kuendeleza uwezo Lugha ya kigeni
kuwa Kiingereza ni lugha ya biashara, makampuni katika nchi nyingi za kigeni Produce Convenience tafsiri ya yao. Taarifa za Fedha katika Kiingereza.
8. Nje Financial Statement Uchambuzi - Matatizo
Mtambo
wengi makampuni International Produce Kauli yao Financial kwa fedha nyingine kuliko Dollar ya Marekani.
Haya inaweza kuwa waongofu na dola za Marekani na Kutafsiri Mizani wote katika kiwango cha Exchange katika Mwisho wa mwaka sasa.
ili kuepuka. uharibifu, kiwango cha sasa Exchange lazima Kutumika kwa ajili ya miaka yote Kabla.
Uchambuzi ni Si potofu na uwiano wa tofauti kwa kutumia Currencies-
Hivyo fedha Ndogo Tofauti ni kawaida tatizo.
9. Nje Financial Statement Uchambuzi - Matatizo
Terminology
. Tofauti katika Terminology kuwepo kati ya Nchi kwa kutumia lugha ya Same
. Kwa mfano, mauzo nchini Marekani ni kawaida Kuitwa mauzo nchini Uingereza
Katika kesi ya Convenience tafsiri, wakati mwingine hizi ni pamoja na Terminology usio wa kawaida na Speakers Kiingereza.
Maarifa ya. biashara na uhasibu Mazingira Je Msaada kupunguza baadhi ya matatizo haya.
10. Nje Financial Statement Uchambuzi - Matatizo
Format
Zaidi Tofauti format ni Si tatizo kwa sababu habari ni Kutokana, Tu katika Place tofauti.
Hata hivyo, tofauti nyingine format ni tatizo kwa sababu habari si zinazotolewa.
Mfano: Ni kawaida katika Ulaya na Si kutoa. Gharama ya nzuri kuuzwa.
Hii inazuia mchambuzi kutoka kuamua pato kiasi asilimia na hesabu mauzo.
11. Nje Financial Statement Uchambuzi - Matatizo
Format
Mfano mwingine:. German na nyingine Bara makampuni ya Ulaya mara nyingi kutofautisha kati ya madeni ya sasa na noncurrent Si
Hii inafanya kuwa vigumu au haiwezekani kwa compute uwiano wa sasa.
12. Nje Financial Statement Uchambuzi - Matatizo
Kiwango cha Disclosure
Disclosure kimataifa huelekea kuwa Limited ikilinganishwa na Marekani wapi Disclosure full ni ya msingi.
Zaidi ya wengi Serious mapungufu Disclosure ni habari juu ya makundi, Mali hesabu, Uendeshaji ya Nje, mpito Taarifa, na hifadhi.
Utandawazi. Disclosure ya masoko Capital huelekea kuongeza Kama makampuni jaribio kuvutia wawekezaji.
13. Nje Financial Statement Uchambuzi - Matatizo
mwafaka
mwafaka ni kipengele Moja ya umuhimu wa habari.
Hii inatofautiana kwa kiasi kikubwa kimataifa tangu kufungua muda uliopangwa tofauti na nchi na nchi.
Miongoni mwa Nchi zilizoendelea, Marekani na Canada ni wengi wakati ambapo Bara Ulaya ni mdogo.
Mahitaji. Kuhusu mzunguko wa habari pia kimataifa kutofautiana kutoka miezi mitatu mitatu kwa Taarifa ya Mwaka.
Kuna sana Little Wawekezaji Je kufanya kuondokana na matatizo haya.
14. Nje Financial Statement Uchambuzi - Matatizo
Tofauti katika kanuni za uhasibu
. Tofauti katika kanuni ya uhasibu mara nyingi Result katika mapato kwa kiasi kikubwa tofauti na nyingine Statement Financial kiasi
Zaidi ya maeneo ya tatizo Biggest ni consolidations, zisizohamishika Mali hesabu na uchakavu, na Goodwill.
15.
mazingira Global ina. jukumu kubwa katika Shahada ya Tofauti uhasibu na Flexibilitet.
Mifano:
. Germany- Kodi / Taarifa Amefungwa Pamoja
Uingereza: "Ni kweli na Haki View"
USA-masharti Utawala makao Viwango (ukodishaji, Pensheni, nk)
16. Nje Financial Statement Uchambuzi - Uwezekano Solutions
Tofauti katika kanuni ya uhasibu
Inawezekana Solutions:
. reframe Nje Taarifa za Fedha kwa GAAP zaidi Familiar
Matumizi walimvua chini ya kipimo cha mapato ambayo haihusishi Items Wengi walioathirika na utofauti.
Kuwekeza kutumia uchumi mkuu viashiria na Mseto Kupunguza kuongezeka habari hatari. .
Jifunze Mitaa GAAP na biashara mazingira-kisha Matumizi Kauli Kama iliyochapishwa.
17. Athari juu ya Taarifa za Fedha Uchambuzi wa Jitihada za kuunganisha Tofauti Uhasibu
Kama Matumizi ya IFRSs New Inakuwa kuenea zaidi, wengi wa matatizo haya Je uwezekano Abate.
Hata hivyo, hata kama kikamilifu antog, IFRSs, Kama sasa yaliyoandaliwa, hawezi kikamilifu kuondokana habari kuongezeka. hatari ya Kimataifa ya Uwekezaji.
Mfano: aina ya biashara Japan na uimarishaji uhasibu. Consolidation uhasibu ilitengenezwa kwa anwani iliyosimbikwa IFRSs Katika Marekani / Uingereza chombo Masuala, Si wale kwamba maendeleo katika tamaduni mbalimbali Karibu Pacific Rim.
18. Nje Financial Statement Uchambuzi -. Ufafanuzi wa uwiano uhasibu
Mazingira ya Biashara Tofauti
Tofauti katika Utamaduni na Mazingira Uchumi na madhara juu ya umuhimu wa uwiano. Tunajua Kuhusu Tofauti hizi ni Muhimu Wakati kuwekeza kimataifa.
A Masomo ya makampuni katika Japan, Korea, na Marekani Kupatikana Tofauti muhimu Kutokana na biashara Mazingira.
Kwa mfano, makampuni ya Japan na Korea kukopa mengi zaidi juu ya muda mfupi MISINGI kuliko makampuni ya Marekani ,. Uongozi Lower uwiano wa sasa.
19. Nje Financial Statement Uchambuzi - Ufafanuzi wa uwiano Uhasibu
Mazingira ya Biashara Tofauti
. uwiano Madeni pia Tunza kuwa ya Juu nchini Japan na Korea sababu ya Serikali uliosababishwa Vyanzo vya fedha
Lower kishindo faida katika Japan, jamaa na Marekani, Je, kuwa sehemu ya kuelezwa na makampuni hayo Focus. kinyume na faida ya soko.
Katika Summary, Mwekezaji Mahitaji kuwa khabari wa haya uwezekano kuacha Tofauti na Si faida (muda mrefu) Uwekezaji.
20. Kurudia kueleza Nje Taarifa za Fedha ya Marekani GAAP
kidato 20-F
Makampuni ya kigeni kwamba faili zisizo Marekani GAAP Taarifa za Fedha na SEC wanatakiwa kukamilisha Fomu 20-F.
kidato 20-F wataafikiana mapato halisi na stockholders 'Equity ya Marekani GAAP.
Hata hivyo, hakuna sharti kupatanisha mali na madeni.
Katika Essence, hii inawakilisha marudio sehemu kutoka GAAP ya Marekani GAAP ya Nje.
21. Kurudia kueleza Nje Taarifa za Fedha ya Marekani GAAP
kidato 20-F
Zaidi uwiano, Kama vile Kurudi juu ya Equity, Je kuwa computed Kama IF chini ya Marekani GAAP.
Wengi uwiano nyingine, hata hivyo, hawezi kuwa computed Kama IF chini ya Marekani GAAP.
mchambuzi Je kuondokana na hili kwa. Performing marudio ya Taarifa za Fedha Items.
22. Kurudia kueleza Nje Taarifa za Fedha ya Marekani GAAP
marudio Overview - Hatua ya Kwanza ya mbili
hatua ya kwanza, reformatting, Taarifa za Fedha inahusisha kubadilisha katika format Marekani.
Hii inahusisha mabadiliko ya:
Tofauti Terminology,
Tofauti Presentation, na
Item Aina za na ufafanuzi.
23. Kurudia kueleza Nje Taarifa za Fedha ya Marekani GAAP
marudio Overview - Hatua ya Pili
Hatua ya Pili inahusisha kurudia kueleza GAAP Nje ni sawa na Marekani GAAP kiasi.
Mchakato Hii ni Made rahisi Wakati Files Company kidato 20-F.
Wakati mwingine, makampuni Je Wasilisha Maridhiano sawa Bila. Fomu 20-F kufungua kweli.
Katika Uchunguzi yoyote, Maelezo ya Taarifa za Fedha ni muhimu sana katika kukamilisha hatua hii.
24. Kurudia kueleza Nje Taarifa za Fedha ya Marekani GAAP
Hatua Mechanics One - reformatting
Anza na Kuanzisha safu Tarakimu karatasi katika Marekani GAAP format.
nguzo ni ya Nje GAAP, debits, mikopo, na Marekani GAAP. Kiasi ni Imesomwa katika Original fedha.
Kuandaa karatasi kwa ajili ya mapato Statement, Taarifa ya kubakia E.