As we are now living in a Global economy, many investors feel the theory of switching to international standards for accounting would make great sense. This international system would make it easier to compare businesses and investments from one country to the next. Today’s investors are no longer looking in their own back yards for their investments; they are looking in areas far away and across the oceans. An International accounting standard may have been a great tool for the investor to easily compare the benefits of particular investments.
The U.S generally accepted (GAAP) accounting principles were being evaluated as a phase out in favor of an international financial reporting standard. This standard is known as the IFRS, Which is set by a London based accounting board.
Diversity and the different ways the countries look at business makes the International standards look like a merger that may not be possible.
I have seen that one of the largest overlooked aspects of international investing is the aspect of accounting. Investors need to be proactive and have their investments properly purchased for maximum return. Many are diligent about creating entity structures that protect their liabilities but not necessarily the best structure to protect their financial benefits. When investing in one country the investor is subject to the taxation laws of that country. They may also have tax consequences when bringing the currency back to their home country. Many times proper tax structuring can avoid double taxation and in fact the proper entity set up can minimize their tax liabilities.
Understanding different taxation laws is paramount to any sound investing decision and this is why we are always introducing our clients to those international accounting firms that can insure an investor has the knowledge and preparation needed to truly capitalize on their investments.