Abstract:
Since multinational companies doing business in different countries, they face different accounting practices which changing country to country. There are various reasons that affect the financial reporting faced by multinational enterprises such as economic structure, political conditions, tax laws, applicable accounting standards, different accounting principles in different currencies, transfer prices, inflation, qualified manpower and culture. These factors change the results of financial reporting. The increasing spread of technological developments in the world and the diversity of economic activities necessitate the standardization of record keeping techniques and increasingly emphasize the necessity of uniform accounting. Today, the number of firms operating in different countries and thus holding records in more than one country is not small and this number tends to increase gradually. The concept of uniform accounting is one of the most important elements of the infrastructure of the free movement of capital. Common accounting standards have a positive impact on the performance of mergers and transnational companies, stock exchanges, investors. In this study, the effects of financial activities will be evaluated and compared between financial reporting system of United States of America and The People’s Republic of China which are the one of the largest two economies in the world. Comprehensive sample financial statements will be reviewed and detailed analyze will be made according to the People’s Republic of China General Accepted Accounting Principles (PRC GAAP) financial reporting standards and The United States of America General Accepted Accounting Principles (US GAAP) financial reporting standards and will be summarized as a comparative table for reference of the business life. The purpose of the work of this comparison and evaluation is to provide accurate, reliable and transparent information to the decision makers and all kind of users who will use the financial statements. For this purpose, both balance sheet and income statement will be used. Different items will be compared with each other from different financial system’s balance sheet and income statement. Changes will be made in relation to the items and the results will be evaluated
