CL E A N S P A C E LT D
24 March 2011
By: Charn Gek Cheng, Chiang Soo Ling, Kummar Sokali Muthu Mogan, Lee Siew Fen Samantha
To: Mrs Maria Long
To: Mrs Maria Long, Manager Accounts Department, Cleanspace Ltd From: Date: Subject: Accounting Theory Team No. 29 24 March 2011 Report on Financial Reporting and Disclosure Practices of France
Enclosed is the research on “Financial Reporting and Disclosure Practices of France” for Cleanspace Ltd, authorised by you on 5 February 2011. In order to determine a suitable site for the international placement of Cleanspace Ltd subsidiary, a summary is done on France public firms’ financial reporting practices and influences. Purpose of the report is to outline the financial accounting reporting and disclosure issues of France that might arise if Cleanspace Ltd decides to list its subsidiary in the France Stock Exchange. This report includes the following: ü Financial accounting reporting environment of France and outlines its current, cultural and historical influences as well as possible future changes; ü A discussion on proposed remuneration plan for the subsidiary’s executive remuneration has been undertaken; and ü Current voluntary disclosure practices explained Should you require further analysis or additional information, please do not hesitate to contact me at 67657766.
Thank You. We look forward to working with you again.
Analysis on France’s financial environment is done to address to Cleanspace Ltd in locating their subsidiary in the country. In France accounting environment, this report addressed the factors of historical, cultural, current and future influences on its financial reporting standards. The debut of France accounting format was Plan Comptable Général designed for public sector enterprises. France’s accounting history goes back till 1630 and factors such as the legal system, enterprise ownership and other country influences have contributed to the evolution. Using Gray, Hofstede and GLOBE studies, we can see how France’s culture affects the accounting system, and these findings are being compared to European Union and the World Average as a whole to have a better understanding. Two concepts, Harmonization and Global Financial Crisis are the current factors that played at the major parts in influencing France’s accounting system. Technically, France ought to adopt IFRS due to the decision EU made, however due to some tax and legal issues, France is deemed not be complying with international standards. Still, some harmonization efforts are undertaken by France. In response to the crisis, some future possible changes to the accounting system are being discussed by IASB. With relations to the past, present and future factors of France, remuneration plan has been draw up which Cleanspace Ltd may adopts in order for the company. There is no ideal remuneration exist, thus we can only come up with the best remuneration in the company’s interest. Lastly, major events that influence internationally have contributed voluntary or mandatory disclosure practices that France is currently practicing. In accordance to the legitimacy theory, some voluntary disclosures are adopted by companies in France to prevent any legitimacy gap. If company have legitimacy gap, it will be difficult for the company to be accepted by the society and this may be fatal to the company’s performance. Interesting fact to be noted that France is practicing mandatory disclosure practice for Environment and Social issues which other countries like, Singapore is currently practicing under voluntary disclosure.
Table of Contents
Executive Summary 1 Introduction
1.1 1.2 1.3 1.4 Purpose Scope Limitations Assumptions
6 6 6 6
France Financial Reporting & Disclosure Practice
2.1 Historical Influences 2.1.1 Taxation 2.1.2 The Accounting...