Financial Accounting: In an Economic Context

REPORTING DIFFICULTIES FACED BY MULTINATIONAL COMPANIES

In this chapter we have covered the mechanics of preparing financial statements measured in U.S. dollars, written in the English language, and using U.S. GAAP. In this section we briefly discuss some of the reporting difficulties faced by multinationals, companies that have their home in one country but operate, own other companies (subsidiaries), and raise capital in other countries.

DuPont, for example, is a Delaware-based company that operates in approximately 90 different countries; has significant ownership interests in entities in the United States, Asia, Europe, and Latin America; and lists its common shares not only on the New York Stock Exchange, but also on a variety of non-U.S. exchanges. DuPont publishes U.S. GAAP-based financial reports expressed in U.S. dollars. Unilever, another world leader in consumer goods, is jointly based in the Netherlands and Britain and has significant ownership interests in entities operating in 23 different countries. Its common shares are listed on the New York, London, and Amsterdam stock exchanges, and it publishes IFRS-based financial statements expressed in euros.

We have already mentioned the difficulties faced by analysts who attempt to compare the financial performance of companies like DuPont and Unilever that publish financial statements based on different accounting standards expressed in different currencies. These same problems plague multinationals that must publish financial ...