A lack of comparability of financial statements also can have an adverse effect
on corporations when making foreign acquisition decisions. As a case in point,
consider the experience of foreign investors in Eastern Europe. After the fall of the
Berlin Wall in 1989, Western companies were invited to acquire newly privatized
companies in Poland, Hungary, and other countries in the former communist
bloc. The concept of profit and accounting for assets in those countries under communism
was so different from accounting practice in the West that most Western
investors found financial statements useless in helping to determine which
enterprises were the most attractive acquisition targets. In many cases, the international
public accounting firms were called on to convert financial statements to
a Western basis before acquisition of a company could be seriously considered.