Topic 4: Country-Specific Accounting Systems - FRANCE Flashcards
(13 cards)
What are the key historical developments in French accounting?
French accounting developed through the Plan Comptable Général (PCG), a standardized chart of accounts reflecting state economic planning first established in 1947. The EU Directives implemented 1983-1985 introduced Anglo-Saxon elements but maintained French characteristics. IFRS became mandatory for consolidated statements from 2005, creating a dual system.
What is the Plan Comptable Général and why is it significant?
The Plan Comptable Général (PCG) is a standardized chart of accounts that all French companies must follow. It provides a detailed coding system for accounts, standardized formats, and measurement rules. This uniform approach reflects France’s tradition of centralized economic planning and ensures consistency across companies for national statistics and taxation.
How does the French legal system influence accounting?
France’s code law system embeds accounting rules in legislation rather than professional standards. The Commercial Code and tax laws contain detailed accounting requirements, creating a rule-based rather than principles-based approach.
How did the accounting profession develop in France?
The French accounting profession developed relatively late - the Ordre des Experts Comptables (OEC) was established in 1942, much later than UK bodies. The profession had limited standard-setting authority as the state controlled accounting through legislation.
What is the relationship between tax and accounting in France?
Traditionally, there has been strong tax-accounting conformity, particularly in unconsolidated statements. Tax rules heavily influence accounting choices to optimize tax positions, with the principle of ‘connexité fiscale’ meaning financial statements generally follow tax rules.
How does the French approach to financing affect accounting?
France historically relied on bank financing, family ownership, and state investment rather than public equity markets. This created less demand for investor-focused reporting and more emphasis on creditor protection and tax compliance.
What are the key characteristics of French unconsolidated statements?
French unconsolidated statements feature: strong tax influence, use of the PCG coding structure, nature-of-expense income statement format, conservative measurement (historical cost dominance), limited fair value, extensive provisions, completed contract method for long-term contracts, and balance sheets showing total assets rather than net assets format.
What are the key characteristics of French consolidated statements under IFRS?
French consolidated statements under IFRS show national patterns: preference for cost models over fair value options, weighted average inventory valuation rather than FIFO, nature-of-expense format rather than function of expense, higher capitalization thresholds, and more extensive provisions where judgment is allowed.
How does enforcement of accounting standards work in France?
The Autorité des Marchés Financiers (AMF) is responsible for enforcement, examining listed companies and audit quality. It operates both proactively and reactively to complaints. Unlike the UK approach, it can provide advance clearance on accounting treatments and generally does not publish enforcement decisions.
What was the Société Générale case and why was it controversial?
In 2008, Société Générale suffered €4.9 billion losses from unauthorized trading. The AMF permitted these losses to be charged to 2007 accounts rather than 2008, invoking the ‘fair presentation’ override under IAS 1. This decision raised questions about national enforcement differences.
How has French accounting evolved since the 1980s?
French accounting has evolved through: 1) EU Directive implementation (1983-1985) standardizing formats and requiring consolidated statements, 2) Growing international capital market participation creating pressure for investor-oriented reporting, 3) IFRS adoption for listed consolidated statements (2005), and 4) Maintenance of traditional approaches for unconsolidated statements with continued tax influence.
How does French accounting approach the concept of ‘true and fair view’?
The French translation ‘image fidèle’ was introduced through the EU Fourth Directive. Traditionally, French accounting emphasized legal compliance over economic substance, making this concept somewhat foreign. While formally adopted, it’s interpreted more narrowly than in the UK.
