(b) Cross-Border Capital Raising in the United States. In the United States, the 1,400
foreign registrants come from about 59 different countries. They are permitted to sub-
mit financial statements in their national generally accepted accounting principles
(GAAP), provided that they add a reconciliation of income and net assets to U.S. GAAP.
But despite the reconciliation, the financial statements and footnotes themselves, and all
of the other financial data in the annual and quarterly reports, are prepared using the
company’s national GAAP—which means different recognition and measurement prin-
ciples for assets, liabilities, and income from the principles that U.S. companies use, as
well as different formats and disclosures. Clearly, for these foreign companies, compa-
rability of most financial figures with similar U.S. companies is not possible, and the
understandability of 59 different GAAPs to American investors is compromised.
(c) Cross-Border Securities Markets. Securities markets themselves are now cross-
ing national boundaries. Euronext, for example, is a recent combination of the former
Amsterdam, Brussels, Lisbon, and Paris stock exchanges. You can buy NASDAQ
and London shares on the Stock Exchange of Hong Kong. American Exchange
(Amex) shares are traded in Singapore. Merger talks continue among some of the
world’s largest stock exchanges.
(d) Investing via the Internet. The Internet now enables any investor anywhere to
gather corporate financial data posted by companies all over the world and enter into
securities purchase and sale transactions on line in markets and through brokers all
over the world. In that environment, a single set of global accounting and financial
reporting standards makes eminent sense.
16.3 ACCOUNTANTS INTERNATIONAL STUDY GROUP (1966–1977). Accoun-
tants and others have been aware of the problems of different sets of accounting stan-
dards for many years. As early as 1966, professional accountancy bodies in Canada,
the United Kingdom, and the United States created an Accountants International
Study Group (AISG) to develop comparative studies of accounting and auditing prac-
tices in the three countries in the hope that their respective local accounting standards
16.3 ACCOUNTANTS INTERNATIONAL STUDY GROUP (1966–1977) 16 • 3Market Percent of Listed Companies that Are ForeignNASDAQ (U.S.) 11%
New York Stock Exchange 20%
Registered with the U.S. SEC— 8% (approximately 1,400 foreign registrants out of
total 16,000 total registered companies)
London Stock Exchange 17% of the number of listed companies are non-U.K.
66% of market capitalization is non-U.K. companies.
Euronext 25%
Switzerland 36%
Germany 24%
Luxembourg 80%
New Zealand 24%
Australia 5%
Singapore 17%
Exhibit 16.1. Globalization of the World’s Securities Markets in Late 2002.