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Financial information maybe, in simple terms, understood as information with regards to the functioning of the enterprise and details of its resources. Accounting of financial information is all about providing data that helps to understand the financial position of the organisation, how resources have been used, future changes etc. It is a part of communication. Proper accounting of financial information is essential and it also helps in proper decision-making. Previously financial information used to be communicated only internally. But with the rise in growth and globalisation, there has been communication of financial information externally too. There are several users of financial information. The users of financial reports use the information obtained from financial statements for specific purposes. Investors, competitors, suppliers, government agencies, general public, employees etc. are some of the various user groups.

But there are differences in the way financial information is reported in different countries. The accounting standards are different in different countries. "Accounting of financial information differs in content and application from country to country. In some situations accounting differences lead potentially to inefficiencies, missed opportunities and distortions of economic behaviour." (Walton, Haller and Raffournier, 2003, pg 1). Differences in accounting standards can lead to misinterpretations of the data obtained from it. " Misunderstandings can occur not only because of differences in the method in which the information is sent but also because of differences relating to the perception and interpretation of the information by the receiver." (Walton, Haller and Raffournier, 2003, pg 2). Misunderstood information then becomes obsolete.

Several factors constitute an explanation for the differences in the financial reporting of countries. Some of the important factors are as follows:

. LEGAL SYSTEMS: Reporting of financial information depends to a great extend on the legal system of the country. " Over the years two types of legal systems have developed. The common law system that originated in England is developed from case law. The main characteristic of common law is that it is a law of precedence. The judgements passed in various cases are used for other cases with similar facts."(Walton, Haller and Raffournier, 2003, pg11)." A common law rule seeks to provide an answer to a specific case rather than to formulate a general rule for the future."(Nobes and Parker, 1995,pg 11). "In a common law situation accounting rules are not a part of the law. Company law in the common wealth countries is kept to a minimum. On the other hand, the code law system that originated in Roman law is characterized by a wide set of rules which try to give guidance in all situations. In code law countries the company law is very detailed and accounting standards are often embodied in the company law. Here rules are linked to ideas of justice and morality; they become doctrine. Countries like United States, England, India, and Singapore etc. follow the common law system; while countries like Japan, Scotland, France, and Germany etc. are code law countries." (Walton, Haller and Raffournier, 2003, pg 25).

2. FORMATS: Evident differences maybe noticed in the format adopted by different countries to report financial information. There are several tools like the Profit & Loss Account, the Balance Sheet, and Income Statement etc. that are used to report financial information. For instance, " There are significant differences from country to country in the presentation and content of the income statement as well as in the accounting methods used to measure income statement amounts. The title of the statement, for example, in the United Kingdom (U.K.) it is called the "Group Profit and Loss Account". For example, a typical U.K. balance sheet begins with non current assets, called fixed assets. Current assets are listed next and current liabilities are subtracted to arrive at net current assets, which is added to fixed assets. Long-term debt is then subtracted from this subtotal to arrive at net assets. The net asset total agrees with shareholders' interest, which is reported last." ( "In Singapore and Hong Kong, there are no standardized formats for financial statements, but items in the balance sheet follow an increasing order of liquidity, and profit and loss accounts are rather sparse documents." (Nobes and Parker, 1995, pg 320)

3. TAX: As mentioned earlier, there are different users of the financial information. The financial information maybe used to determine the amount of tax to be paid by an organisation. " In countries like Belgium expenses are only tax deductible if they are also mentioned in the Profit and Loss account. As a result financial reporting becomes tax influenced or even tax biased. The link between taxation and financial reporting is often found in those countries that do not have an explicit investor approach in their financial reporting orientation. This relationship can also vary over time. For example, Spain, for a long time ha d a strong link between financial reporting and taxation. But after 1989 the link has become weak and they are moving to be independent." (Alexander et al, 2004, pg 26). " In Korea depreciation generally follows tax rules. In Hong Kong deferred tax is partially accounted for using the liability method, as in the UK. In Taiwan, deferred tax accounting follows US practice.
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4. EARNINGS PER SHARE: "Earnings per share receive more attention in the United States than in most other countries. In countries that do require EPS disclosures, requirements differ widely. For instance, earnings for the numerator of the EPS calculation are defined in the United States as earnings available for common shareholders, and separate calculations are required for ordinary income and net income when differences exist. In some countries, though, earnings are defined as continuing income from operations only (Norway, e.g.). In the United States, basic and diluted EPS are reported. Other countries have similar requirements but define the ...

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