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Unformatted text preview: lems and Solutions 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. Is this optimal? 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. Foreign Financial Statement Analysis – Foreign Financial Statement Analysis – Problems and Solutions Terminology Differences in terminology exist between countries Differences using the same language. HW problem #3 HW For example, “inventory” in the U.S. used to be For called “stocks” in the U.K. In cases of convenience translations, sometimes these In include terminology unfamiliar to English speakers. include Knowledge of the business and accounting Knowledge environment, as well as a careful reading of the notes to the financial statements can help alleviate some of these problems. these Much of the U.S. and U.K. differences were removed Much in 2005 when the U.K. adopted IFRS. in Foreign...
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