It is possible to determine the degree of conservatism of U.K versus U.S. GAAP, because
A) British firms must disclose the difference due to London Stock Exchange requirements.
B) British firms voluntarily disclose the difference in order to attract U.S. investors.
C) British firms who list an American Depositary Receipt (ADR) or an actual share in the United States must disclose the difference in earnings.
D) all of the above.

Question

Quizplus · Accepted Answer

British firms who list an American Depositary Receipt (ADR) or an actual share in the United States must disclose the difference in earnings. This is because the Securities and Exchange Commission (SEC) requires listed foreign firms to reconcile their financial statements to U.S. GAAP, which allows investors to compare the financial results of different companies using the same accounting standards. Therefore, it is possible to determine the degree of conservatism of U.K. versus U.S. GAAP by analyzing the differences in the reconciled financial statements. The other choices (A and B) are not necessarily true for all British firms, as disclosure requirements may vary depending on the type of shares traded or the regulatory framework in which the company operates.

It Is Possible to Determine the Degree of Conservatism of U.K