6.3. Reconciliation of Financials P

6.3. Reconciliation of Financials Prepared According
to Different Standards
When analyzing fi nancial statements created under different frameworks, reconciliation
schedules and disclosures regarding the significant differences between the reporting bases are
usually available. For example, the SEC currently requires reconciliation for foreign private
issuers that do not prepare fi nancial statements in accordance with U.S. GAAP. The EU is
currently considering requiring reconciliations for companies trading on European markets
that do not prepare fi nancial statements using IFRS. Such reconciliations can reveal additional information related to the more judgmental components of the financial statements
and can have important implications for security valuation.
A first look at the disclosure related to any such differences can sometimes be daunting,
particularly if the reconciliation is lengthy. For example, Syngenta ’ s 2005 U.S. SEC Form
20 - F filing discusses these differences in Note 33, “ Signifi cant Differences between IFRS and
United States Generally Accepted Accounting Principles. ” This note is longer than 15 pages!
Given the length of reconciliation disclosure, a systematic method to quickly digest the
information can be helpful. A good starting point is the chart that provides the numerical reconciliation of net income and shareholders ’ equity (see Exhibit 3 - 7). These reconciliations can