Manulife Financial Corporation announced a loss of $1.28 billion in the third quarter. While low interest rates and falling stock markets have certainly contributed to the company’s profit loss, there is another vital factor at play here: discrepancies between the American and Canadian accounting rules.

Were Manulife to be located south of the border, they would have reported a $2.2 billion profit in the third quarter, this calculates to a discrepancy of $3.4 billion. Manulife’s shareholder equity is also $16 billion higher when calculated according to American standards.

These technical differences put Manulife as well as all other Canadian companies at a competitive disadvantage when compared to their American counterparts. Potential stakeholders will look at a company’s accounting statements to estimate the future return of the company before investing in it. A company with more profitable accounting statements will naturally attract more investors as it gives an image of secure returns.

In conjunction with the notion of ethics, the discrepancies between the American and Canadian accounting regulations are unethical for investors because they are not given a “true” picture of the market, and thus may be irresponsibly investing money.

Picture- Manulife Stock Prices

Manulife's stocks see a significant decline this week