What are the 10 principles of ...

In France, there are 10 fundamental accounting principles. These are defined by the French Commercial Code and form the foundation of the accounting profession. They are presented below.

TABLE OF CONTENTS:

1. The Going Concern Principle
2. The Independence of Accounting Periods Principle
3. The Historical Cost Principle
4. The Prudence Principle
5. The Consistency of Methods Principle
6. The Materiality Principle
7. The Non-Offsetting Principle
8. The Principle of Clear and Adequate Disclosure
9. The Substance Over Form Principle
10. The Opening Balance Sheet Intangibility Principle

The Going Concern Principle

The going concern principle assumes that, when preparing financial statements, the company intends to continue its operations beyond the end of the current fiscal year. In other words, when annual accounts are drawn up, the business plans to keep operating.

This principle is essential because it determines which valuation rules apply in accounting. For example, it allows assets to be depreciated over several years. Without this assumption, the company would be considered to have ceased operations, which would significantly impact asset valuations.

The Independence of Accounting Periods Principle

At the end of each fiscal year, companies must engage an accountant to conduct an inventory and prepare annual financial statements. Under the independence of accounting periods principle, invoices from customers and suppliers must be allocated to the fiscal period to which they relate—regardless of their invoice date. Thus, the independence principle requires that each invoice be recorded only once.

The Historical Cost Principle

Historical cost reflects the value of assets at the time of acquisition. Assets received free of charge or as gifts are recorded at their estimated fair value. Assets produced internally are recorded at their production cost.

The historical cost principle mandates this approach and prohibits revaluing an asset upward at the time of balance sheet preparation. However, if the asset’s value has declined, the company must record a provision to reflect this impairment.

The Prudence Principle

The prudence principle is one of the most important concepts in French accounting. It discourages companies and accountants from deferring current uncertainties to future accounting periods. Such uncertainties could distort the company’s net worth and reported financial results.

Consequently, this principle requires businesses to recognize all probable or certain losses related to the closing fiscal year—even if those losses become evident only after the year-end date.

The Consistency of Methods Principle

The fifth accounting principle in France is the consistency of methods. It requires a company to apply the same accounting methods throughout its operations, enabling meaningful year-over-year comparisons of financial data.

However, deviations are permitted under two conditions. First, if the company adopts the preferred method—i.e., the one recommended when multiple options exist—accounting yields higher-quality information. Second, if an exceptional event occurs that justifies a change in method to improve the relevance and reliability of financial reporting.

The Materiality Principle

The materiality principle allows accountants to omit or simplify insignificant details. However, all material information—essential for ensuring accuracy and transparency—must be fully disclosed.

The Non-Offsetting Principle

The non-offsetting principle requires that the following elements be reported separately:

· Assets and liabilities on the balance sheet

· Revenues and expenses on the income statement

These categories cannot be offset against each other. For instance, a receivable and a payable cannot be netted on the balance sheet, nor can revenue and an expense be combined in the income statement. An invoicing and accounting software can help you generate your balance sheet and income statement in just a few clicks.

The Principle of Clear and Adequate Disclosure

Echoing the materiality principle and the obligation of truthful reporting, the principle of clear and adequate disclosure ensures that financial statements provide readers with relevant, self-explanatory, and comprehensible information.

The Substance Over Form Principle

The substance over form principle ensures that transactions are reported transparently and reflect their true economic and financial reality—not merely their legal form.

The Opening Balance Sheet Intangibility Principle

Finally, the opening balance sheet intangibility principle states that the opening balance sheet must exactly match the closing balance sheet of the previous fiscal year. Therefore, neither the accountant nor the company may alter the opening balance sheet so that it diverges from the prior year’s closing figures. Amounts and accounts must correspond precisely. Naturally, this principle does not apply to a company’s very first accounting period.

Accounting principles number ten in total and vary in complexity. Regardless, every accountant in France is legally required to adhere to them, as they govern the entirety of French accounting practice. A certified public accountant can provide guidance if you have any doubts.

Consult a Certified Accountant When in Doubt

And if you’re unsure, we highly recommend Dougs: an online accounting firm registered with the French Order of Chartered Accountants. Dougs offers its own business management application, tailored for small businesses. We were impressed by its user-friendly interface, competitive pricing, and expert team—always ready to answer your questions about accounting and financial management.

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