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.
                                                       9-2
          Analysis of Foreign Financial 
                       Statements
    Learning Objectives
    1. Discuss reasons to analyze financial statements 
       of foreign companies.
    2.    Describe potential problems in analyzing 
       foreign financial statements.
    3. Provide possible solutions to problems 
       associated with analyzing foreign financial 
       statements.
    4. Demonstrate an approach for restating foreign 
       financial statements to U.S. generally accepted 
       accounting principles (GAAP).
                                                       9-3
        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.
      •  International investors, including managers of 
         international mutual fund, rely on foreign 
         financial statements.
 Learning Objective 1                                                          9-4
        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.
 Learning Objective 1                                                          9-5
        Reasons to Analyze Foreign Financial 
                                 Statements
      Other reasons
      •  Extending credit for foreign customers.
      •  Evaluating foreign vendors.
      •  Comparisons to international competitors.
 Learning Objective 1                                                          9-6