What are the major problems caused by worldwide accounting diversity for a multinational corporation

Need to reconcile accounting standards

Multinational companies will operate in different countries which may have different accounting standards. American companies for instance are meant to use GAAP but as multinationals will operate in a lot of IFRS using countries.

They will have to reconcile statements from these IFRS using companies to GAAP standards for disclosure requirements in the U.S.

They might also be required to convert their American GAAP statements to IFRS so that the countries they are in can perform investor analysis if need be.

Comparing statements is harder.

When the company has to make foreign decisions, it cannot just make them looking at the financial statements of the local subsidiary. It will have to convert that statement to the one they use so that they can compare effectively and be able to make informed decisions.

Risk of low quality Accounting information.

Some of the countries the MNC operates may not be adequately developed in the financial services sector to ensure proper accounting regulation which means the MNC runs the risk of receiving poor information from subsidiaries.

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