France France is included in the IFAD GAAP Convergence Studies National Professional Organisation Website: Ordre des Experts Comptables National Professional Organisation Website: Compagnie Nationiale des Commissaires aux Comptes National Professional Organisation Website: Institut Francais des Experts Comptables Standard Setter Website: Conseil National de la Comptabilite (CNC) (French Accounting Standards Council) (in French) Response to IFAC Member Body Survey on Standard Setting and Regulation Update for January 2009 Update for October 2008 Update for July 2003 Update for January 2003 Update for October 2002 Update for July 2002 Update for April 2002 Update for January 2002 Update for May 2001 Paris: Financial Reporting Framework in France Adoption of IFRSs in Europe Effective in 2005 In June 2002, the European Union adopted an IAS Regulation requiring European companies listed in an EU securities market, including banks and insurance companies, to prepare their consolidated financial statements in accordance with IFRSs starting with financial statements for financial year 2005 onwards. EU countries have the option to: Require or permit IFRSs for unlisted companies. Require or permit IFRSs in parent company (unconsolidated) financial statements. Permit companies whose only listed securities are debt securities to delay IFRS adoption until 2007. Permit companies that are listed on exchanges outside of the EU and that currently prepare their primary financial statements using a non-EU GAAP (in most cases this would be US GAAP) to delay IFRS adoption until 2007. The European IAS regulation applies not only to the 27 EU Member States but also to the three members of the European Economic Area (EEA) – Iceland, Liechtenstein, and Norway. France is an EU Member State. Consequently, French companies companies listed in an EU/EEA securities market will follow IFRSs starting in 2005. In January 2005, the European Commission published the results of a survey of the 25 EU member states and the 3 EEA member states on their plans regarding the four options above. For information on each country's plans, click to download: Table on Use of IFRS Options in 27 Member and 3 EEA States (PDF 52k) The European Commission has adopted the following wording for use in the notes to the accounts and in the audit reports of companies subject to EU Regulation 1606/2002/EC (the 'IAS regulation'): "in accordance with International Financial Reporting Standards as adopted by the EU" or "in accordance with IFRSs as adopted by the EU". Companies may also state, in a footnote, compliance with IFRSs as adopted by the IASB, if that is the case. January 2009 Update January 2009: AMF recommendations for 2008 financial statements The Autorité des Marchés Financiers (AMF), the French securities regulator, has posted the English text of its Recommendations Regarding Financial Statements for 2008 (PDF 236k). As an EU member state, France requires companies whose securities trade on a regulated market to use International Financial Reporting Standards in their consolidated financial statements. Click here for the Recommandations de l'AMF en vue de l'arrêté des comptes 2008 (French version, PDF 369k). The AMF recommendations for 2008 financial statements are presented in ten sections as follows: First-time application of IFRS 7 Financial Instruments: disclosures IAS 39 Financial instruments: recognition and measurement IAS 36 Impairment of assets IAS 19 Employee benefits IAS 1 Presentation of financial statements – classification of debts as current or non-current Business combinations and consolidation IFRS 5 Non-current assets held for sale and discontinued operations IFRS 8 Operating segments New standards and interpretations Application of standards and interpretations in the European Union Annual amendments IFRIC 11 IFRS 2 – Group and treasury share transactions IFRIC 12 Service concession arrangements IFRIC 13 Customer loyalty programmes IFRIC 14 The limit on a defined benefit asset, minimum funding requirements, and their interaction IFRIC 15 Agreements for the construction of real estate European proposal concerning exemption from consolidation October 2008 Update Statement on fair value from French regulators Four French accounting and regulatory authorities have issued a joint recommendation to address the accounting treatment of certain financial instruments that can 'no longer be reliably priced on the market because of the ongoing turmoil'. Essentially, the group supports the guidance recently provided by the IASB and FASB in this regard. The four French authorities are the national accounting board (Conseil national de la comptabilité), securities regulator (Autorité des marchés financiers), banking supervisor (Commission bancaire) and insurance oversight authority (Autorité de contrôle des assurances et des mutuelles). Click to download the Statement of French Authorities (English) (PDF 44k) and French Language Version (PDF 51k). July 2003 Update Comité d'urgence of the Conseil National de la Comptabilité During the second quarter of 2003, the Comité d'urgence issued three interpretations on existing standards: 2003-B - with respect to the classification (ordinary/exceptional item ) of contributions payable by financial institutions to the deposit indemnity mechanism. This interpretation clarifies that such contributions should be considered as operating expenses for financial institutions except the subscriptions paid for the year 1999 (first year of implementation of the funds). 2003-C - with respect to the consequences of a new tax regime for investment properties in investment companies. According to new tax regulations, an investment company can opt for a tax payment as settlement of current and future unrealised, gains on its investment properties. The interpretation clarifies that, when a company chooses this option, it should account for the tax payment: — either as a deduction of the revalued amount of the investment properties, if the company decides to revalue its assets at fair value at the date of the option; — either as an expense if the company prefers not to revalue its assets. 2003-D - on accounting for compensation received for the impairment or loss of items of property, plant and equipment. This interpretation clarifies that compensation received from third parties (either insurance companies or other parties) after the impairment or loss of items of PP&E should be included in the income statement when recognised. This interpretation is consistent with the requirements of SIC 14, PP&E - Compensation for the impairment or loss of items. Conseil National de la Comptabilité (CNC) At its plenary session of 24 June 2003, the CNC approved four new Avis. The Avis will become binding when the Comité de la Réglementation Comptable (CRC) approves them. Three Avis are specific to pension funds, mutual funds, and securitasation vehicles. The Avis CNC 2003-10, Accounting for Revaluation Surplus, clarifies the treatment of the revaluation surplus and reminds that it cannot be distributed. Conseil National des Commissaires aux Comptes (CNCC) Following the issuance of the transitional provisions of the CRC regulation 2002-10 with respect to maintenance and major overhaul costs (see January 2003 IAS Plus Newsletter - Europe/Africa Edition), the CNCC issued, in June 2003, a communiqué to clarify how to apply the transitional provisions of the regulation to the individual annual financial statements and in consolidated accounts. As a result: For financial statements covering periods beginning before 01 January 2003, entities that have not yet recognised provisions for maintenance and major overhaul are not required to do so. However, entities that have already recognised such provisions must continue to do so. For financial statements covering periods beginning on or after 01 January 2003, all entities will have to recognise major overhaul costs, either by using the component approach for its assets under URC Regulation 2002-10 or by recognising provisions for future costs under CRC regulation 2000-06. The CNCC position clarifies that entities may not necessarily apply the same accounting policy (provision vs. component approach) for maintenance costs as for major overhaul costs and that they can opt for a different treatment in annual financial statements and in consolidated accounts. Commission des Opérations de Bourse (COB) On 30 June 2003, the COB issued a communiqué that is applicable to the reports that will be published by French listed companies under the French listing requirements. This communiqué reminds companies that: For classifying a financial instrument as equity, the instrument should meet the two following criteria: — The instrument should not be redeemable nor its reimbursement be controlled by the issuer, and — Interest is not due by the issuer in case of a lack of profit. When considering specific instruments for which interest payment can be postponed from one year to another, the COB recommends that this type of instrument should analysed carefully in order to determine if the payment of the interests due is probable or not. The communiqué indicates that this probability should be evaluated by reference to past experience and to the present and future perspective of the issuer. January 2003 Update Comité de la Règlementation Comptable (CRC) On 12 December, the CRC approved 13 new regulations (CRC Regulations 2002-01 to 2002-13) based on CNC Avis approved in 2002 (see April, July, and October 2002 IAS PLUS newsletters – Europe-Africa edition), thereby giving them authority in France. Those regulations include: CRC regulation 2002-03 on accounting for credit risk by financial institutions, which becomes effective for annual financial statements beginning on or after 1 January 2003. Earlier application is permitted; CRC regulation 2002-10 on depreciation and impairment of assets, which becomes effective for annual financial statements beginning on or after 1 January 2005. Earlier application is permitted. There are other important new regulations that will modify financial reporting by insurance companies and mutuals, investment companies and agricultural co-operatives. Comité d'urgence On 18 December 2002, the Comité d'urgence issued 3 interpretations on existing standards. 2002-D - with respect to the accounting of treasury shares In France, when a company buys back treasury shares, it must disclose the reasons why it bought back these shares. Their accounting treatment depends on the declared intent of how the treasury shares will be used. Treasury shares are either recognised as: investments and carried at cost less impairment (which is contrary to the requirements of SIC 16, Reacquired Own Equity Instruments), or a deduction from equity. The interpretation deals with the subsequent derecognition of the treasury shares as investments, so as to account for them as a deduction from equity. The Comité d'urgence concluded that the carrying amount to be deducted from equity should be measured at the market value of the treasury shares at the date of the transfer (or the share's last published market value for annual financial periods ending before 18 December 2003). 2002-E - with respect to the recognition in consolidated financial statements of deferred taxes on intercompany elimination The Comité d'urgence concluded that, in most cases, no deferred taxes should be recognised on the following consolidation entries: elimination of internal transfers of investments in subsidiaries, associates, or joint ventures within the group that give rise to tax gains or tax losses, elimination of a provision or a reduction in the carrying amount of investments in subsidiaries, associates or joint ventures because such investments are impaired, which is deductible for tax purposes. 2002-F - with respect to the recognition of impairment losses by insurance companies The Comité d'urgence clarified the criteria to be met for the recognition of impairment losses of assets, in the financial statements of insurance companies (insurance companies follow a separate set of accounting rules). Conseil National de la Comptabilité (CNC) Communiqué on Argentina with respect to hyperinflation (17 December 2002). The CNC concluded that Argentina should not be classified as a hyperinflationary economy in 2002. This position is consistent with the position taken under US GAAP by the International Task Force of the AICPA in September 2002. Communiqués on major overhaul provisions (13 December 2002 and 15 January 2003) CRC regulation 2000-06, which is effective in 2002, requires the recognition of provisions for maintenance and major overhaul costs (contrary to IAS 37, Provisions, Contingent Liabilities and Contingent Assets where these provisions are prohibited). In December, the CRC approved CRC regulation 2002-10 (see above), which requires the implementation of the component approach for assets at the latest by 2005 (similar approach to that in IAS 16, Property, Plant and Equipment and SIC 23, PP&E - Major Inspection or Overhaul Costs). CRC regulation 2002-10 also modifies the requirements of CRC regulation 2000-06 with respect to the requirements for the recognition of provisions for maintenance and major overhaul costs, where a component approach is implemented. The requirement to recognise provisions for maintenance and major overhaul costs does not apply if an enterprise implements the component approach. In effect, the effective date of CRC regulation 2000-06 for major overhaul provisions is postponed from 2002 to 2003.The CNC communiqué clarifies the transitional provisions in CRC regulation 2002-10, with respect to the maintenance and major overhaul costs. As a result: at 2002 year-end, entities that have not yet recognised provisions for maintenance and major overhaul costs are not required to do so. However, entities that have already recognised such provisions must continue to do so; at 2003 and 2004 year-ends, all entities will have to recognise major overhaul costs either by using the component approach for its assets under CRC regulation 2002-10 or by recognising provisions for those future costs under CRC regulation 2000-06; at 2005 year-end, all entities that do not apply IAS will have to apply CRC regulation 2002-10 on depreciation and impairment of assets and follow the component approach. Commission des Opérations de Bourse (COB) In November, December and January, the COB (French securities regulator) issued various communiqués that are applicable to the reports that will be published by French listed companies under the listing requirements. These include: joint recommendations with the Banking supervisor (Commission Bancaire) about off-balance sheet transactions (issued 15 November). These recommendations will make it harder to recognise transactions off-balance. They require an analysis of the substance of the transactions, including whether transactions are linked; recommendations for the preparation of 2002 year-end financial statements (issued 27 December - 6 topics are addressed including increased information on off-balance sheet items and transactions); recommendations for the preparation of the 2002 listing document (issued 16 January - 14 topics addressed). October 2002 Update October meeting of the French standard setter At its October meeting, the Conseil National de la Comptabilité (CNC) approved ten Avis, which will become binding once approved by the Comité de la Règlementation Comptable ('CRC'), normally before year-end: Avis CNC 2002-08 and 2002-09 deal with changes to the specific accounting plan (codification and requirements) for mutual insurance entities and other mutual entities; for entities subject to the insurance regulation (distinct accounting from other industry groups), Avis CNC 2002-10 deals with the accounting of special financial instruments and Avis CNC 2002-11 with a proposed decree on issuance of government bonds index on changes in general prices; Avis CNC 2002-12 changes some requirements of Avis CNC 2002-07 (approved in June) related to depreciation and impairment of fixed assets (see further details below); Avis CNC 2002-13 deals with accounting for combined accounts; Avis CNC 2002-14 deals with the accounting by agricultural co-operative entities and Avis CNC 2002 -15 by entities engaged in forest activities; Avis CNC 2002-16 deals with the review of a proposed decree to implement a European directive related to transparency on financial relationships between Member States and public entities as well as other entities; Avis CNC 2002-17 deals with the review of a decree affecting housing associations (syndicat des propriétaires). In addition, the CNC issued an Exposure Draft on the Definition and Accounting for Assets, for comments by 15 January 2003 (see further details below). Exposure Draft on the Definition and Accounting for Assets The document proposes general principles for the recognition of assets. The proposals try to harmonise the requirements mainly with those included in the Framework, IAS 16, Property Plant and Equipment, and IAS 38, Intangible Assets. However, some differences would remain, such as the ability to defer under French GAAP unrealised gains on transactions in a foreign currency and the deferral of certain costs such as the costs of issuing equity and establishment costs. Also, an entity would still have an option to capitalise or recognise as an expense development expenditure where the requirements for the recognition of an asset would be met. Depreciation, impairment and major overhaul provisions The revisions to Avis CNC 2002-07 on depreciation and impairment of assets try to facilitate the transition to IFRS by 2005, by changing French GAAP to allow some IFRS treatments to be applied under the current French law. Currently, Regulation CRC 2000-06 requires the recognition of provisions for maintenance and major overhaul (a difference with IAS 37, Provisions, Contingent Liabilities and Contingent Assets where these provisions are prohibited). The revisions to Avis CNC 2002-07 will allow, for an entity that has implemented a component approach for its assets – including for maintenance and major overhaul – to avoid the recognition of provisions for those costs. In France, the component approach for assets is new and Avis CNC 2002-07 - approved in June 2002 - proposes to implement it. As a result of the changes made to Avis CNC 2002-07, at 2002 year-end, an entity will normally either have a choice to implement a component approach for its assets and avoid the recognition of provisions for major overhaul or maintenance or, if it is does not implement a component approach, it must recognise provisions for those future costs. It is yet unknown what will be the effective date imposed by the CRC for making the CNC Avis mandatory, although an early application of the requirements is expected. Changes to French GAAP affects the calculation of income taxes and the position of the Tax Authorities on the proposed changes is not yet fully known. Requirement to prepare consolidated financi al statements: lowering of the exemption threshold relating to the number of employees. French unquoted companies are not required to prepare and publish consolidated financial statements, when the group, made up with the parent company and the controlled entities, does not exceed two of the three following thresholds over two successive fiscal years: Total assets: EUR 15 Million Net turnover: EUR 30 Million Average number of permanent employees: 250 Since the decree dated March 2002, the thresholds have been in line with the European requirements. July 2002 Update At its June meeting, the Conseil National de la Comptabilité (CNC) approved the following texts: Avis no 2002-05, Presentation of individual financial statements of investment companies. Avis no 2002-06, Presentation of consolidated financial statements of investment companies. Avis no 2002-07, Depreciation/amortisation and impairment of assets. To become mandatory, these texts must be approved by the Comité de la Réglementation Comptable (CRC). Approval is expected to be received before the end of the year. The CRC will also set out the effective dates and transitional requirements for these texts. Avis 2002-05 and 2002-06 lay down requirements for a prescribed format of the elements of financial statements (balance sheet, income statement, notes) of investment companies. Avis 2002-07 revises current requirements for the depreciation/amortisation and impairment of assets. The text was written with the objective of harmonising the requirements with: IAS 16, Property, Plant and Equipment. IAS 38, Intangible Assets. IAS 36, Impairment of Assets. However, in some cases the harmonisation exercise was limited due to: The existing link between accounting and taxation in individual financial statements. The current IASB projects on these topics. As a result, for example: Depreciation may be calculated differently in individual and consolidated financial statements. Some intangible assets may not be amortised. Recoverable amount is calculated based on the higher of net selling price and value in use. However, the text does not require the discounting of cash flows in determining value in use. The text also includes much less guidance than IAS 36 (for instance, it does not include the concept of cash-generating units). The CNC will reconsider these new requirements once the IASB has finalised its projects on Business Combinations - Phase I and Improvements to IFRS. April 2002 Update In January 2002, the Comité d'Urgence of the Conseil National de la Comptabilité (CNC - French standard setter) issued two interpretations on existing standards. These new interpretations are: Avis 2002 - A - with respect to deferred acquisition costs recorded in consolidated financial statements of insurance companies. In some cases, the amount of acquisition costs is less than the amount of revenue relating to loadings on premiums. In this case, deferring the acquisition costs leads to a higher net margin in the first year. Considering this, the Comité d'Urgence has decided that the recognition of the loadings on premiums should match the recognition of the acquisition costs of the same contracts in the income statement. Therefore, the gross acquisition costs should be deferred, limited to the amount of the future net margins and amortised, to match with the recognition of the future net margins. Avis 2002 - B - with respect to payments in return for authorisation to use an UMTS (Universal Mobile Telecommunications Systems) spectrum that will be used by third generation mobile phones. This interpretation supersedes the interpretation 2001-F (see the January 2002 IASPLUS Newsletter), which was issued before the change by the government of the basis for calculation of the payments. Subsequently, it has been decided that the payments relating to the use of the licence will comprise a fixed amount of € 600 million to be paid up-front, and a variable amount to be paid annually, calculated as a percentage of turnover. The licence will be granted for a twenty-year period. It was agreed that the fixed amount of the licence constitutes an intangible asset to be recorded at grant date. Regarding the expected payments related to variable amounts, if the expected payments cannot be measured reliably, they should be recorded as an expense in the period when they arise. If the variable amount can be reliably measured at grant date, then the present value of all payments should be recognised as an intangible asset (with a liability counterpart) at grant date. The difference between the recognised present value and the total actual payments should be recognised as interest expenses over time. The intangible asset should be amortised over the probable period of utilisation, no more than twenty years. An impairment test should be performed at each reporting date, where there is an indication of impairment. CNC Current Project on "Amortisation, Depreciation and Impairment of Assets" The preliminary draft proposal to revise requirements for amortisation, depreciation and impairment of assets was released in April 2002. While the proposal tries to harmonise the requirements with IAS 16, Property, Plant and Equipment, IAS 38, Intangible Assets, and IAS 36, Impairment of Assets, differences will remain. Under this project, the CNC is currently considering a proposal for compulsory non-amortisation of goodwill, subject to an impairment test approach. However, this test, in its current proposed form, would require impairment testing of goodwill under IAS 36, Impairment of Assets, and not under the current proposals under consideration by the IASB. Comments are due by mid May 2002. Additional Statements Issued At its plenary session of 28 March 2002, the CNC approved the following texts applicable to financial institutions: an Avis on accounting for portfolios and groups of homogenous elements; an Avis on accounting for credit risk in case of probable losses. These texts will become binding when they will be approved by the Comité de la Réglementation Comptable. A draft Avis was also distributed for comment on accounting for credit risk in case of expected future losses. January 2002 Update On 3 October 2001 the Comité d'Urgence of the Conseil de la Comptabilité (CNC - French standard setter) issued two interpretations on existing standards. These new interpretations are: 2001-F - with respect to payments in return for authorisation to use an UMTS (Universal Mobile Telecommunications System) spectrum that will be used by third generation mobile telephones. It was agreed that such a licence constitutes an intangible asset, which should be amortised over the useful life of the licence. The cost of the asset and related debt should be equal to the present value of the future payments (which were initially scheduled to be fixed over 15 years). Note, the interpretation was finalised prior to a change in the basis of calculation of the payments by the government. Part of these payments has now become contingent upon sales arising from the use of the licence. The Comité d'Urgence is reconsidering how the change in the future payments for the licence affects the accounting treatment of the licence. 2001-G - with respect to insured employee benefits in the consolidated accounts of insurance companies. It was agreed that it is necessary to distinguish between internal and external insurance contracts relating to employee benefits. Insurance contracts that grant rights directly to employees against the insurer represent external insurance contracts for which recognised liabilities should be maintained. However, insurance contracts between entities within the group, which cover internal risks only, should be eliminated consistent with the elimination of all internal transactions in consolidated accounts. May 2001 Update In January 2001, Mr Antoine Bracchi, was appointed by the Ministry of Finance, chairman of the Conseil National de la Comptabilitié (CNC). The CNC is the organisation that prepares and proposes accounting regulation for the endorsement of the Comité de la Réglementation Comptable (CRC). (CNC and CRC members are appointed by the Ministry of Finance). Mr Bracchi has a background as an auditor and retired managing partner of E&Y France. Although French Parliament approved a law in 1998 that allows the use of internationally recognised accounting principles to prepare financial statements (i.e. IAS And US GAAP), the conditions to make the law effective were never met. As a result, French companies must prepare and publish primary financial statements according to French GAAP. There are certain conflicts between French GAAP and IAS. However, if a company does not have the certain types of transactions that conflict, it may be able to comply with IAS. Just after the restructuring of the French standard setting system (restructuring of the CNC and creation of the CRC), major accounting texts were issued in 1999 and 2000. In particular, two regulations relating to revisions of the consolidation rules were endorsed in 1999, one for the commercial and industrial companies (CRC regulation n°99-02), the other one for banks (CRC regulation n°99-07), effective for annual financial statements beginning on or after 1 January 2000. Revisions of the consolidation rules for insurance companies were also issued in 2000 (see below). Although one aim of the revisions was to harmonise with IAS as far as possible, the new standards do not fully comply with IAS. Recent standards endorsed by the CRC in late 2000 are: CRC n°2000-05: revisions to the new consolidation rules for insurance companies, effective for annual financial statements beginning on or after 1 January 2001 (earlier adoption permitted). CRC n°2000-06: results in new rules to account for provisions and certain liabilities. The new rules are compliant in many respects with IAS 37 and are stricter than previous French rules regarding the recognition criteria (for instance regarding restructuring). However, differences with IAS still exist: provisions for major maintenance and repairs are allowed and French companies may choose either to not, partly or fully account for provisions for post retirement benefits. Full provisioning however is the preferential method. Effective for annual financial statements beginning on or after 1 January 2002 (earlier adoption permitted). CRC n°2007 and CRC n°2008 relate to the "French pooling method" and amend previous requirements included in CRC regulations n°99-02 and n°99-07. Note that the CNC also operates an urgent issue task force (Comité d'urgence) to interpret or clarify existing accounting standards. In 2000 and early 2001, the task force mainly examined specific issues relating to consolidation rules including the "French pooling method", presentation and accounting for dissimilar activities, accounting for an additional share in capital acquired in a joint venture already consolidated under the proportional method, and whether to recognise a deferred tax asset arising on the carry forward of unlimited tax losses.