Contrary to the Anglo-American approach, France offers, in terms of accounting, an environment representative of those of many countries in continental Europe. Nonetheless, France offers a typical system, where, because politicians and executives are part of a close and tight elite network, the Head of State can intervene in the setting of international accounting rules. France also differs from other major countries in Continental Europe, such as Germany, due to the interest of its large business groups in foreign capital markets, shown as early as the late 1960s. This paper serves the purpose of describing and analysing the historical development of the French reporting standards, with a political and economic stance rather than a technical one. This paper studies the evolution from the established French framework to the adoption of European and IAS standards, from the post war period until nowadays. Firstly, the traditional French system is described, with the presentation of the business community, the legal and political framework and the conventional accounting rules. Secondly, the paper presents the reasons for the shift away from traditional French accounting standards which dates back as far as the early 1970s. This phenomenon is all the more interesting since no official international accounting standards existed at that time.
[...] As a result, the financial statements of many large French corporations were made directly comparable to those of similar American companies, and hence favoured foreign investments (Barrett, Roy, 1976) Voluntary adoption of International standards by French groups The first examples of French companies adopting alternative practices can be traced back to the early 1970s: Saint-Gobain-Pont-à-Mousson first published consolidated financial statements according to the international accounting principles in 1971, following the merger between Saint-Gobain and Pont-à-Mousson (Cairns, 2006). This change in the presentation of financial statement was justified as follows: decision to produce and publish consolidated financial statements according to international, i.e. [...]
[...] On the other hand, for Saint-Gobain, which is quoted only in Paris and went back to French GAAP in the late the adoption of IAS regularised some loopholes in the interpretation of accounting standards (Appendix 1). For instance, in the balance sheet, the main differences stemming from actuarial gains in pensions and other post-retirement benefits correspond to a reduction in shareholders' equity. Consequently, all pension obligations are now accrued for in the balance sheet. Secondly, property, plant and equipment are valued using the IAS 16, which leads to longer average useful lives for items compared to the accelerated depreciation system. [...]
[...] Other important differences appear between the French and American systems Cash-flow statement In addition to the balance sheet and the income statement, the former Accounting Principles Board (APB) required US firms to publish the statement of changes in financial position, which was replaced by the statement of cash-flow in 1987. On the other hand, and as previously said, the French system offers a limited availability of information, compared to its Anglo-American counterpart. Under the French Code of Commerce, which has been influenced by the 4th European directive, the only two compulsory financial statements are the balance sheet and the income statement, which must always be accompanied by notes, as the 1957 PCG focused on standardising the balance sheet and the income statement. [...]
[...] By isomorphic imitation, many other firms from this sector followed the move of Saint-Gobain and the Rhône Poulenc group in adopting international accounting standards Divergence in the presentation of financial statements The adoption of new standards supposes a divergence between two sets of rules. The French accounting framework originates from different sources as that of the United States and is described in the codified system Order of documents The French view differed from the Anglo-American when we compare the purpose of the financial statements. [...]
[...] Finally, the paper explains why, despite an early enthusiasm for international standards, French firms adopted new rules according to their own interpretation, until the year 2005 when the full compliance came into force thanks to the adoption of the IAS regulation by the European Union. To understand better issues related to French reporting, the essay is supported by the case study of two firms, namely Saint-Gobain and Rhône- Poulenc Brief description of the traditional French system The French reporting system is used to serve the local business system, in line with the characteristics of the environment and the expectations of the national stakeholders. [...]
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