|International Business Credit Management Articles
Several traps to avoid using Letters of Credit
In connection with a request for open account credit terms from a foreign customer, some trade creditors request and will sometimes receive financial statements from these customers. Foreign statements should be reviewed with great care. These statements are normally not prepared or formatted in the same way as U.S. financial statements. For example, assets may be listed in a different order from the way they would appear in financial statements. Financial statements are not prepared based on U.S. Generally Accepted Accounting Principles. In some cases, accounts that would be defined as liabilities under U.S. accounting rules are classified as equity [and vice versa].
There are several other traps to avoid when analyzing foreign financial statements, including these:
For all of these reasons, credit professionals must view foreign financial statements with a certain amount of professional skepticism.
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