Multiple accounting policy discrepancies have raised awareness that a solution should be found to harmonize and unify accounting standards. Thus, in 1973, ten countries got together to try to respond favorably to this issue and they established the IASC (International Accounting Standards Committee) in order to standardize accounting and to create a unique standard.
The promulgation of international accounting standards, IAS (Internal Accounting Standards) and IFRS (International Financial Reporting Standards), became a new stage for the process of harmonization. Accounting frameworks were reintroduced in a different format to guide companies. Moreover, the proliferation of corporate scandals such as Enron, Worldcom and Vivendi had disrupted the financial market's confidence.
In 2002, the European Union decided to standardize the accounting policies of its member states by adopting the IFRS, for a total of 7,000 listed companies including 1,000 French and 30,000 affiliates.
The study aims at analyzing the IFRS through their impacts to better appreciate them.They are taxed in France as well as in other countries, but we do not know the consequences that these might have on the accounts of French companies. Moreover, the French accounting system which is linked to the base of taxation is complex and unique. This has led to question ourselves about the outcome of this development and whether or not this favorable for French companies.
To address this concern, this thesis will first be built around a part that will show why a standard was established before, and the second part analyzes the changes involved in the transition to IFRS, and conclude on the consequences of these norms on French companies.
The main objective of the US GAAP (General Accepted Accounting Principles) was to regulate the financial market. This was created in 1933 by the Securities Act after the crash of 1929. This was lat updated in 1973 at the time of the establishment of the FASB (Financial Accounting Standards Board).
The three bodies that work on these underlying frameworks are: The FASB is a private organization composed of professionals whose goal is to create and revise different policies of accounting standards. The SEC (Security Exchange Commission), is a public organization and aims at controlling the financial markets. The AICPA (American Institute of Certificate Public Accountant) is a professional organization responsible for training professionals and business audits. It's the American equivalent of CNCC (National Committee of Statutory Auditors).
US GAAP which was created in conjunction with stakeholders from the private sector can be classified into four categories:
- The SFAC (Statements of Financial Accounting Councept) are standards defining the conceptual frameworks of reference.
- The SFAS (Statements of Financial Accounting Standards) are a part of their technical standards and therefore within the meaning of the word.
- Publications (interpretations and technical bulletins) are those expressed by the FASB to finance the laws and agreements that are passed.
- Finally, EIFT abstracts are notices issued by the Emergency Committee. It is a body that works along with the FASB.
[...] The assets and liabilities Besides the above effects, the "goodwill" of French credit institutions recorded a variation of + as opposed to what was observed by the CEBS On a French level, this increase is generally considered as an inclusion in the "goodwill" of certain items recorded as an intangible asset in French standards and not IFRS where the cancellation of depreciation and provisions of the "Goodwill" French GAAP is replaced by an impairment test. It also results in liabilities which result in lower provisions for risks and charges due to the reallocation of reserves generated by depreciation of assets and the application of funding rules on post-employment benefits and share-based payments granted to staff. [...]
[...] Another challenge is juggling a relatively long period with various differentials with IFRS as the reference model and the French standards are still enforced, and until the Ministry of Finance collects taxes, businesses must leave a tax return. From a voluntary perspective, the French standards are still used to keeping certain benchmarks in order to obtain a better insight into their accounts. This can result in the preservation of the French accounting system and move the closing entries to international standards, which is to leave the system intact and reprocess some data, but this work is very complex. [...]
[...] Finally, in the absence of standards, technical standards are used to help convey a picture as best as possible. The second function of the pursuit of transparency is to restrict the darker side of corporate balance sheets, by requiring the reprocessing of off-balance sheets to present the reality of the accounts better . These points are intended to improve transparency of financial reporting by providing the tools necessary to limit the "Window Dressing" by applying a limitation of options in the standards. [...]
[...] A major difference between IFRS and French GAAP is related to disclosure, as the opening and closing balances increase during the year, the amounts used and those listed as not used. Finally, explanations concerning the nature, timing, the existence of uncertainties, repayments during the year and the assumptions used for the upgrading and updating, should also be provided for consistent provisions. Pension obligations Pension obligations means accounting for benefits paid to employees by the company to post jobs, taking the form of retirement benefits, life insurance, sometimes post-employment, medical or supplements retirement. [...]
[...] The study aims at analyzing the IFRS through their impacts to better appreciate them.They are taxed in France as well as in other countries, but we do not know the consequences that these might have on the accounts of French companies. Moreover, the French accounting system which is linked to the base of taxation is complex and unique. This has led to question ourselves about the outcome of this development and whether or not this favorable for French companies. To address this concern, this thesis will first be built around a part that will show why a standard was established before, and the second part analyzes the changes involved in the transition to IFRS, and conclude on the consequences of these norms on French companies. [...]
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