Explanation

Statement 1 is CORRECT Cross-border company comparisons indeed face multiple challenges:

• Accounting method differences: Different countries use different accounting standards (US GAAP vs. IFRS)
• Cultural differences: Business practices, disclosure norms, and corporate governance vary
• Economic differences: Currency fluctuations, inflation rates, and economic cycles differ

Statement 2 is INCORRECT While harmonization efforts (like IFRS adoption) have reduced accounting differences, they have not eliminated the need for adjustments because:

• Not all countries have adopted IFRS
• Even with IFRS, implementation and interpretation differences exist
• Cultural and economic differences still require adjustments
• Different tax regimes and regulatory environments persist

Conclusion: Only Statement 1 is correct, making option A the right answer.