The relationship between accounting and taxation is critical for determining the tax on the profits of French companies, but understanding this relationship is difficult because of constant changes taking place accounting policies.
Accounting is defined as the systematic recording, reporting and analysis of financial transactions of a business. Thus, accounting reflects the value of a company's assets and its profits and losses, and is a key source of financial information about the company for creditors and shareholders
[...] In effect, taxable income and accounting income of a company are often different because of the exemptions provided by accounting rules and tax laws. The table of "determining the taxable income" attached by the company to its statement, traces three kinds of operations: reinstatement, deductions and adjustment measures. The reinstatements are additions to the accounting result of past accounting charges, but the deduction is partially or completely prohibited by tax law in the case of long-term capital losses. For example, the remuneration of the members of a company of people and depreciation, because the tax authorities are reluctant to see that such assets are depreciated irreversibly over time. [...]
[...] An example of the provision is an accounting technique formulated to record the impairment of non- depreciable assets or to anticipate future expenses. Similarly for depreciation, the new accounting standards seem to prevail over the tax law, because of its silence on the subject. Tax and accounting seem connected, but require some attenuation. II- THE POSSIBLE DISCONNECT BETWEEN ACCOUNTING AND TAXATION This section will consider the extra accounting adjustments are necessary to determine the taxable income, and observe the link between taxation and accounting accepted internationally. [...]
[...] THE RELATIONSHIP BETWEEN ACCOUNTING AND TAXATION Before observing what the criteria for determining taxable income are, The principle of taxation needs to be examined A-The principle: the primacy of the accounting measurement The theory of the balance sheet, replaced the theory of "source", which included only the results of normal operations relating to the ongoing operations of the business in taxable income. This principle became a law on January and was included in Article 38 of CGI. According to Article 38-1 of CGI, the net is "determined by the overall results of operations of any kind made by companies including in particular disposal of any material assets, either during or at the end of operation.”According to Article 38-2 of the Tax Code," the net income represents the difference between the values of Net assets at the time of closing and the net assets at the time of opening of the period for which tax is being determined Thus the taxable income is determined by the company's performance record. [...]
[...] The French solution is characterized by a strong link between accounting and taxation, and is justified by the legislating state intervention in accounting. This system has the merit of simplifying the work for exempted companies. Such hold two accounts, one for accounting purposes, and the other for tax purposes. B-The criteria for determining the taxable income To determine taxable income, the accounting results of the Firm being assessed are taken into consideration. There is a limit beyond which external consultants may not be employed in the accounting activity. [...]
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