Chapter 10 - Analysis of foreign financial statements. In this chapter we will discuss: Overview of financial statement analysis, 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. | Chapter Topics Overview of financial statement analysis. 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 . GAAP illustrated. Learning Objectives Discuss reasons to analyze financial statements of foreign companies. Describe potential problems in analyzing foreign financial statements. Provide possible solutions to problems associated with analyzing foreign financial statements. Demonstrate an approach for restating foreign financial statements to . generally accepted accounting principles (GAAP). Overview of Financial Statement Analysis Accounting analysis—reflection of economic reality (. inconsistent standards, estimation errors and intentional manipulation) Financial analysis (cash flow, profitability and risk analysis) Prospective analysis—using accounting analysis and financial analysis, along with business environment analysis and company strategy, to forecast future cash flow and income Foreign portfolio investment Investors can diversify away some risk by investing internationally. While stock returns in many countries are positively correlated with . returns, these correlations are far from perfect. International investors, including managers of international mutual funds, rely on foreign financial statements. Learning Objective 1 International mergers and acquisitions The frequency and size of international corporate mergers has increased in recent years. Examples include Ambev/Anheuser-Busch; BP/Amoco; and acquisitions by Ford Motor such as Volvo (of Sweden), who, in 2010, reached a deal to sell Volvo to China’s Zhejiang Geely Holding Group. The purchaser of an international company needs to analyze the target company’s financial statements to determine the acquisition price. Learning Objective 1 Other reasons Extending credit for foreign customers. | Chapter Topics Overview of financial statement analysis. 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 . GAAP illustrated. Learning Objectives Discuss reasons to analyze financial statements of foreign companies. Describe potential problems in analyzing foreign financial statements. Provide possible solutions to problems associated with analyzing foreign financial statements. Demonstrate an approach for restating foreign financial statements to . generally accepted accounting principles (GAAP). Overview of Financial Statement Analysis Accounting analysis—reflection of economic reality (. inconsistent standards, estimation errors and intentional manipulation) Financial analysis (cash flow, profitability and risk analysis) Prospective analysis—using accounting analysis and financial
