demand for understandable accounting that transcended borders. Potential foreign investors need understandable accounting to not only select the business they would like to invest in, but also to monitor how their investment is doing once it's made; however, differences in accounting treatments can often be misleading. Gillies (2003) states, "Differences in accounting standards often explain away some differences in valuation between U.S. And foreign stocks". These differences can be misleading to a potential investor, causing him to make investment decisions he would not otherwise make, if all financial data were similarly prepared. Wilkinson (1964) agreed that accounting standards, in their current state of the mid-1960s, negatively affected investors because of the different accounting rules in different countries. More prophetic, he believed that it would be a long time before financial statements would be meaningful across national boundaries. When comparing the differences in accounting treatments of financial statements between Germany, Japan and the United States, it becomes clear that Wilkinson was correct.
             The United State's Focus on the Income Statement Versus Germany and Japan's Focus on the Balance Sheet:
             Comparison of accounting treatments of financial statement items between Germany, Japan and the United States were chosen due to the size of these three countries' capital markets, as well as their differences in their accounting systems and institutional structures. Whereas Germany and Japan have similar corporate governance structures and accounting systems, as noted by Nobes (1998), America's more market oriented and institutional structure is based on the Anglo-Saxon/British accounting model. In contrast, German accounting is often noted as an example of the Continental model of accounting development (Martin, 2000). Based in code law, German accounting emphasizes financial reporting conformity...