The major roadblock to foreign companies listing their overseas stock on U.S. exchanges has long been the big difference between accounting standards in the United States and abroad. Recently, several of the major accounting policymaking boards, including the FASB, have shown an interest in developing a separate set of accounting standards for companies that wish to raise equity capital outside of their home countries. The New York Stock Exchange (NYSE) appears to favor this proposal because it would encourage a number of foreign companies to have their securities listed in the United States, which The Wall Street Journal (August 29, 1995) reports would “almost double” the NYSE’s volume. However, some analysts fear that such a proposal would not be worth the price. That same article notes that “Pat McConnell, Bear, Stems & Co.’s accounting gum, maintains that this gap would create the potential for big lies in financial statements of companies in foreign countries with weak accounting rules. Indeed, she frets that it would prevent U.S. investors from making meaningful comparisons of U.S. and foreign stocks.” REQUIRED: Discuss this issue from the perspective of the following:

a. A foreign company wishing to raise capital in the U.S.

b. A U.S. company that has equity securities already listed in the NYSE. Chapter 12 Stockholders’ Equity 639 C12-13 (International financing) Cl 2-14 (The annual report of MCI)

c. An executive of the NYSE.

d. An investment analyst who makes recommendations to buy and sell equity securities.