Identifying and Coping with Balance Sheet Differences: A Comparative Analysis of U.S., Chinese, and French Oil and Gas Firms Using the ‘‘Statement of Financial Structure’’

ABSTRACT: In a globalized business world it is often necessary to compare companies across national boundaries. This comparison often includes an examination of financial statements. While the harmonization of accounting standards continues to progress, there still remain differences in how accounting information is reported between com-panies located in different countries, especially with regard to the format used to pres-ent the balance sheet. It is consequently important that students be able to both iden-tify these differences, and have a method for coping with them. Using three oil and gas firms from three different countries (Exxon in the United States, Sinopec in China, and Total in France), this paper provides a setting for students to identify differences in balance sheet formats across countries. The paper then introduces a standardizing model—the Statement of Financial Structure—that enables students to cope with these differences. In working with this Statement, students develop their financial analysis skills. In particular, the concept of working capital is reinforced, as is the importance of understanding the local business environment in order to interpret the numbers an