Accounting policies

The General ledger must provide to its various users (shareholders, employees, partners, tax authorities…) reliable from an economic standpoint information.

Thus in France, the Code of the trade, in its article Article L123-14 lays out that:

“the annual accounts must be regular, sincere and give a faithful image of the inheritance, financial position and result of the company. ”

In addition, in the same article, it is specified that:

“If, in an exceptional case, the application of a countable regulation appears unsuitable giving a faithful image of the inheritance, financial position or result, it must be derogated there. This exemption is mentioned from the appendix and duly justified”.

This precision is particularly interesting, because it states clearly that the compliance with a countable rule does not guarantee to it only the sincerity of the accounts (see the article on the creative Comptabilité).

A certain number of principles must thus be respected, to guarantee the reliability of countable information. These principles are generally clarified in the Code of the Trade. One also finds precise details in the Chart of accounts (PCG).

Principle of regularity

The regularity can be defined as conformity in the rules and procedures in force.

The L123-23 article of the Code of the Trade provides that:

“regularly held accountancy can be allowed in justice to show between tradesmen for facts trade.

If it were irregularly held, it cannot be called upon by its author with his profit. ”

Principle of sincerity

According to this principle, the company must establish an accountancy by observing in good faith (with sincerity) the rules and procedures in force.

Principle of permanence of the methods

L123-17 article of the Code of the Trade (extracted)

“Unless an exceptional change does not intervene in the situation of the tradesman, natural person or morals, the presentation of the annual accounts as of the adopted methods evaluation cannot be modified from one exercise to another”

This provision aims at ensuring the coherence of the countable information provided during the successive exercises.

Principle of not-compensation

L123-19 article of the Code of the Trade (extracted)

“the elements of Active and Passif must be evaluated separately. No compensation can be operated between the stations of credit and liability of the Bilan or between and the product charging stations of the Income statement”.

Concretely, this principle requires that a credit not be able to compensate for or hide a debt.

Principle of prudence

Article L123-20 of the Code of the Trade (extracted)

“the annual accounts must respect the principle of prudence. For their establishment, the tradesman, natural person or morals, are supposed to continue his activities. ”

The observation of the depreciation of certain fixed assets (Damping) or the constitution of Provision rises from this principle of prudence.

According to this principle, any event which is likely to decrease the value of the inheritance of the company must be taken into account. Always according to this principle, any event which can increase the value of the inheritance of the company cannot be the subject of a countable recording. Thus, the appreciation latent of the wallets titles of a company cannot be recorded, contrary to depreciation latent.

Principle of the historical costs

Article L123-18 of the Code of the Trade (extracted)

“on their date of entry in the inheritance of the company, the goods acquired subject to payment are recorded at their cost of acquisition, the acquired goods on a purely free basis with their value estimated and the produced goods at their production costs. ”

Principle of continuity of exploitation

L123-20 article of the Code of the Trade (extracted)

“For annual accounts, the tradesman, natural person or morals, is supposed to continue its activities. ”

Principle of independence of the exercises

L123-21 article of the Code of the Trade (extracted) “Only the annual ones”. This principle has as an incidence the use of specific accounts of regularizations in order to affect the loads and the products in the good exercise. Indeed, the loads and the products of a exercise (NR) cannot depend with the loads (produced) on exercise (N-1) or (N+1).

See too

International Financial Reporting Standards

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