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British Accounting: Summary of main differences with the French accounting



1 Accounting

In France, the interaction between accounting and taxation is high, whereas in Britain it is not the case: the accounting and taxation are independent. Taxable income is determined extra - an accounting through reinstatements and tax deductions.

This principle of independence added to concern of having a true and fair accounts of the company (a "true and fair view" principle we also know in IFRS) imply significant differences between the French accounting UK and we examine in Chapter 2.

2 The records

2.1 The management report.

Establishes the leaders of society, it aims to provide an overview of the company at the end of the year.

2.2 The income statement (profit and loss account).

Less detailed than in France, the ranking is done by function (in France by nature) and will need to use the schedules to find the nature of income and expenses. Key positions



Turnover ( Turnover, Concept of income or sales similar to the French concept)

- Cost of sales ( Cost of production sold, has cats 1st materials, cost of labor, costs of production including depreciation of assets used in R & D ...)

= Gross profit or loss (Gross )

- Distribution costs (costs of distribution, Marketing, personnel costs related to the function distribution, advertising, transport, ...).

- Administrative expenses (Administrative Overhead)

- Other Operating Income (other revenues)

= Operating Profit (EBIT)

+ Income from shares in group (income from affiliates, dividends, investments short term)
- Interest payable and similar expense (Interest payable and similar charges)

= Profit or loss is ordinary activities Before Tax (Profit before tax)

- Extraordinary Items (Extraordinary items, p roducts and charges rare but significant. Action taken by management).

= Profit or loss for the Year (Profit for the year)

2.3 The Balance Sheet (Balance Sheet)

In France, the Review contains the active column and next another column on the liabilities of the company with a rating of less liquid (equity capital) at the liquid (bank overdrafts, cash).

In Britain, the presentation is to list (see simplified list below):

Fixed Assets (Fixed Assets)
+ Current Asset (assets)
- Creditors: Amounts falling due Within One Year (Current liabilities )
- Creditors: Amounts falling due after More Than One Year (Medium Term Debt) =
Capital and Reserves (Net assets / equity capital)

The deviations from the French accounting:

- The principle of basis as in French accounting is the valuation of balance sheet at historical cost. Nevertheless, Great Britain, revaluations, even partial and completed at different dates can change the historical values.

- The concept of goodwill does not exist. The marks are recorded as an asset. Intangible assets are amortized.

- Regarding fixed assets, there is a total disconnect with the tax depreciation. Assets acquired under finance lease should be capitalized (in France it's off-balance in the accounts) with cons in part to passive, recording the debt-financed.

- The assets and liabilities due within one year are presented separately.

- The legal reserves are not compulsory in Britain.

3 Conclusion

Differences between British and French accounts are especially marked in the company accounts and may disappear in the consolidated accounts based on the options chosen by the French company (in particular the transition to IFRS).