Given the global nature of the financial markets, investors, (1)_, are frequentl

Question

Given the global nature of the financial markets, investors, (1)_, are frequently making investments in companies that are located all over the world. While many companies located outside the U.S. prepare financial statements in accordance with (2)_, financial statements of U.S.-based entities are based on (3)_. (4)_ in the basis of presentation make the analysis of U.S. and non-U.S.-based company financial statements (5)_.

(1) a.abroad, b. both in the U.S. and abroad, c. in the U.S.

(2) a. IFRS, b. ISAs, c. U.S. G.A.A.P

(3) a. IFRS, b. ISAs, c. U.S. G.A.A.P

(4) a. Differences, b. Similarities

(5) a. difficult, b. impossible

Explanation / Answer

Given the global nature of the financial markets, investors, both in the U.S. and abroad are frequently making investments in companies that are located all over the world. While many companies located outside the U.S. prepare financial statements in accordance with IFRS, financial statements of U.S. based entities are based on U.S G.A.A.P. Differences in the basis of presentation make the analysis of U.S. and non U.S based company financial statement difficult.

The above statement gives one of the reason to adopt IFRS by U.S. companies so that there is easy comparison of financial statements of companies in two different countries with common accounting standard followed. With common accounting standard of IFRS, the global investors would find it easy to make financial investment globally.

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