International companies entering France must comply with French GAAP (Plan Comptable Général – PCG) to ensure legal, financial, and tax alignment. This guide helps foreign subsidiaries, branches, and representative offices understand French accounting requirements, how they differ from international standards like IFRS, and what to expect in terms of reporting obligations.
What Is French GAAP (Plan Comptable Général)?
French GAAP refers to France’s local accounting standards, known officially as the Plan Comptable Général (PCG). It provides a comprehensive framework for how companies operating in France must prepare and present their financial statements.
Unlike IFRS, which aims to reflect fair market values and economic substance, French GAAP is more rules-based and conservative in nature. For instance, unrealized gains are rarely recognized, and revaluations are generally discouraged except in specific situations.
For international companies entering France, understanding French GAAP is crucial to ensure local statutory compliance. Even if they report globally under IFRS or US GAAP, they will often need to maintain dual books or reconcile their group reporting with PCG for French authorities.
Who Needs to Follow French GAAP?
In France, all companies that are legally registered and operating under French jurisdiction must comply with French GAAP for statutory accounting purposes. This includes French subsidiaries of foreign parent companies, local entities, and certain branches of international firms, depending on their structure.
The requirement applies regardless of whether the entity is a small SARL or a large Société Anonyme (SA). Even if a company prepares consolidated accounts under IFRS at the group level, its French entity must still submit local financial statements to the tax authorities using French GAAP.
Do Foreign Firms Established in France Need to Follow the French GAAP/ PCG?
There is an important distinction between established and non-established foreign businesses.
Established companies, that is, those with a legal presence in France, such as a subsidiary or permanent establishment, are required to maintain local books in French, prepare annual accounts according to PCG, and file them with the Greffe du Tribunal de Commerce (French Commercial Court Registry).
You can learn more about the specific requirements for non-established firms and established firms in our dedicated blog posts.
Do Foreign Firms Not Established in France Need to Follow the French GAAP/ PCG?
Non-established entities (ESEFs) generally do not need to comply with French GAAP. However, if a non-established entity crosses certain tax or commercial thresholds, it may trigger reporting or filing requirements under French law.
Presentation of Financial Statements Under French GAAP
Basic Presentation of Annual Accounts
Companies are required to use the basic format for their annual accounts if they meet at least two of the following conditions:
- The total balance sheet exceeds €6,000,000.
- The total turnover is over €12,000,000.
- The company employs more than 50 people.
Simplified Presentation of Annual Accounts
Companies that meet at least two of the following criteria are allowed to present a simplified balance sheet and income statement:
- The total balance sheet does not exceed €1,000,000.
- The total turnover is below €2,000,000.
- The workforce consists of no more than 20 employees.
Medium-sized French companies can also opt for a simplified income statement format if they satisfy two or more of the following:
- Total balance sheet under €20,000,000.
- Turnover below €40,000,000.
- A headcount of 250 employees or fewer.
Presentation Options Under Simplified Accounts
There are three options regarding the appendix within simplified accounts:
Very small entities, those meeting two of the following may choose not to present an appendix at all:
- Total balance sheet under €350,000
- Turnover below €700,000
- Workforce of 10 employees or fewer
Companies fulfilling two of the following thresholds can submit an abbreviated appendix:
- Total balance sheet under €6,000,000
- Turnover below €818,000 for trading activities or €247,000 for service activities
- No more than 50 employees
Entities exceeding two of the following criteria must provide a simplified appendix:
- Total balance sheet over €6,000,000
- Turnover exceeding €12,000,000
- More than 50 employees
Key Differences Between French GAAP and IFRS
While both French GAAP and IFRS aim to provide accurate financial reporting, they differ significantly in philosophy, structure, and practical application.
French GAAP prioritizes legal form and conservatism, while IFRS emphasizes fair presentation and economic substance. These differences can impact everything from financial results to tax outcomes.
Here are the key differences between French GAAP and IFRS that you should know:
Accounting Aspect |
IFRS |
French GAAP |
|---|---|---|
Asset Valuation
|
Allows or requires fair value measurement for investment property, financial instruments, and certain intangible assets.
|
Generally, relies on historical cost, resulting in a more conservative balance sheet less sensitive to market changes.
|
Revenue Recognition
|
Based on performance obligations and transfer of control.
|
Uses more rigid, form-based criteria often linked to legal completion of the transaction.
|
Consolidation & Presentation
|
Offers more flexibility in presentation formats.
|
It has prescriptive layouts and terminology for financial statements.
|
Key Components of French GAAP Reporting
French GAAP financial statements consist of three main components:
- Balance Sheet (“Bilan”): This statement provides a snapshot of the company’s financial position at the end of the reporting period, detailing assets, liabilities, and equity. It follows a structured format to ensure transparency and comparability.
- Profit & Loss Statement (“Compte de Résultat”): This report summarizes the company’s revenues, expenses, and net profit or loss over the accounting period, highlighting operational performance and profitability.
- Annexes (Notes to the Financial Statements): These are supplementary notes providing detailed explanations and breakdowns of figures presented in the balance sheet and profit & loss statement, enhancing clarity and compliance with reporting requirements.
The Plan Comptable Général (PCG), the French GAAP chart of accounts, structures all accounting transactions into Classes 1 through 8. This organization ensures consistency in recording and reporting financial information across all entities in France.
Filing and Disclosure Obligations for Companies Operating in France
Companies operating in France must:
- Approve Financial Statements in French within six months following the fiscal year-end. This approval usually takes place during a shareholders’ meeting.
- File Financial Statements with the local Commercial Court Registry (Greffe du Tribunal de Commerce) within one month after approval, making the reports publicly accessible unless the company qualifies for confidentiality exceptions, such as micro-enterprises.
Failure to meet these deadlines can result in administrative penalties and increase scrutiny during audits, affecting the company’s reputation and financial standing.
Challenges for International Companies When Complying with French GAAP
Foreign subsidiaries or branches face several challenges complying with French GAAP:
- Language Barrier: All accounting records, reports, and supporting documents must be maintained and submitted in French, requiring translation and familiarity with local terminology.
- System Alignment: Many international companies must maintain dual accounting systems — one complaint with PCG for local reporting, and another aligned with IFRS for group consolidation. This can increase operational complexity and costs.
- Reconciliation Needs: Differences between French GAAP and IFRS necessitate adjustments when consolidating financial statements at the parent company level, often involving detailed reconciliation processes.
- Expertise Gap: Navigating French accounting regulations demands local expertise. International firms typically engage French expert-comptables (certified accountants) or local audit firms to ensure compliance, accuracy, and smooth reporting.
Adhering to French GAAP is essential for companies operating in France to meet legal obligations, facilitate audits, and comply with tax regulations. International businesses should:
- Gain a strong understanding of PCG fundamentals and reporting requirements.
- Prepare for the reconciliation and alignment between French GAAP and IFRS to ensure consistency across financial reports.
- Partner with local experts to navigate the regulatory landscape efficiently and avoid costly compliance errors.