Every U.S. listed foreign company with actual business operations in that country has to file financial statements with the U.S. Securities and Exchange Commission (SEC) as well as the corresponding securities agency within the foreign country.

Because of differences in the basis of accounting, the financial results filed with the SEC are almost always different than those filed with the foreign governmental authority of the listed company. In certain cases, discrepancies between SEC results and those of foreign government agencies intentionally misreport revenue and earnings to those authorities, often to lower their tax liability, or increase their asset base for more favorable borrowing terms.