INTERNATIONAL ACCOUNTING

TOPIC :Financial reporting of France

BY-
SAILEELA N
FA191432
 Financial reporting of France

4th directive was implemented in accounting act 1983’

 Accounting act 1983 requires the enterprise to establish an accounting manual which
contains explanation about accounting systems ,data processing procedure & accounting
principles used in preparing of annual accounts of the organization and also the annual
accounts are to be consistent ,honest and gives true & fair view.

 There is a commercial code PCG- plan compatible general , which contains basic
requirements of law regarding keeping of accounts and presentation of annual accounts .
Plan compatable general
 It is a national accounting code for the financial reporting & accounting .
 It is issued under the authority of the French national accounting council
 It produces true & Fair view by application of prudence , consistency & faithful
reckoning .
 It is revised in frequent intervals & amendments & additions are made more
frequently.
 PCG CONTAINS
 Terminology
 Valuation & measurement rules .
 Rules linking the chart of accounts to the financial statements.
 Regulations for special statements/ situations.
 Methodology for consolidated accounts.
 Guidance on management accounts.
A)Professionalism v/s statutory control:
Marginally professional & also there is a strong influence of tax law on statutory
control ,resulting in less influence of French accounting profession on direct
development of accounting practices.

B) Uniformity v/s flexibility

Highly uniform .
PCG is the most significant factor in determining the level of uniformity.

C) Conservatism v/s optimism.

French accounting is highly conservative.
The dominance of tax law tend to encourage conservative practices.
D) Secrecy v/s transparency.
 French accounting is more transparent compared with Germany.
 This is evident by disclosing additional information as follows :
 Notes on ACCOUNTS.
 Segment reporting
 Management report .
 Social balance sheet.

E) True and Fair view :

French word ume image fidele translated as faithful picture .
The French approach to true & fair view seems to allow some changes towards
substances rather than form .
F) Financial statements format
 Obligatory to follow the format provided in the 4th directive .
 For individual company accounts the balance sheet must be in horizontal format
& for group accounts it may be in vertical / horizontal format.
 P&l a/c may be in vertical /horizontal format.
 Expenses :
1. For individual companies – must be presented by nature .
2. For group accounts – must be presented by functions
 In B/S , assets are on the left & liabilities & equity are on the right .
 The act allows consolidated B/S , P&L a/c to be presented in more simple format .
G) VALUATION OF ASSETS
Tangible assets – historical cost of valuation is presented under the accounting act
1983. it includes :
a) Purchase price for goods purchased by the company
b) Production cost for goods manufactured by the company.
Intangible assets :
Goodwill : arising out of acquisition is amortized and the period varies from 2-40
yrs. . Immediate write off of goodwill is permitted against reserves.
R&D : treated as on asset under French accounting ,
pure research- never reported as an asset .
Applied research – treated comparably with development expenditure .
Under French accounting R&D is more flexible than in IAS 9 with regard to optional
capitalization of development expenditure
 Long term contracts

a. Percentage of completion method is not mandatory but is commonly used.

b. The WIP must be valued and the customer must have accepted the work
done , costs to completion must have estimated and it must be possible to
estimate and must be possible to estimate the final profit with a reasonable
degree of certainty.

c. As per the 4th directive, the profit recognised on the contracts are reported
as an amount receivable from the customer rather than as an element of WIP.
 Inventories

1.All provisions of IAS 2 are applied in France.

2.Lower cost and net realisable value.
3.The presentation of information in Balance Sheet requires the disclosure of full
amount of historical cost followed by a separate provisional to arrive at realisable
value.
4.Changes in the price movement in the inventories, FIFO method is permitted for
both Individual and Group accounts but LIFO method is available only for Group
accounts.
5.Most French company use average cost method. Thus there is conservatism in
French accounting.
 Provision and Contingency
1.)There is high incidence for provisions and risk charges such as:
•Amounts in respect of ongoing litigation
•Restructuring and re organization
•Taxation
•Pension
•Redundancy of employees
•Service due to clients
•Loss in subsidiaries which are guaranteed by the parent.

2.Many of these items would in UK accounts be reported in notes to accounts rather

than as provisions on the face of balance sheet.