Economical Sciences 3/. Financial activities
Bozhina
A.A.
National University of Food
Technologies
ACCOUNTING
METHODS IN DIFFERENT EUROPEAN COUNTRIES: FRANCE
French
cost accounting methods were born under the pressure and influence of
industrial engineering associations participating in the Scientific Management
movement. They carried their ideas forward under the auspices of the Commission
Générale d’Organisation Scientifique du Travail (CEGOS) organized
by a federation of businesses. The main purpose of the method was to homogenize
the cost calculations in the industry sectors. Out of their first report,
published in 1927, and compiled by Lieutenant-Colonel Rimailho (1937), “Une
méthode uniforme de calcul des prix de revient: Pourquoi? Comment?” (A
Uniform Method of Cost Calculation: Why? How?). The implementation of cost
accounting systems was done independently from the financial accounting
processes. Thus, management accounting and financial accounting were explicitly
decoupled (i.e. based on a dualist accounting systems view).
Corner-stone
of French cost accounting method: ñoncerning financial accounting, the French
Accounting Plan (Plan Comptable énéral) requires that costs have
to be reported by their inherent nature. Costs are not assigned to products or
to departments. Thus, the French income statement has a macroeconomic
orientation which does not allow manufacturing companies to collect or disclose
prime cost data (i.e. direct materials, direct labor, manufacturing).
Definitions:
in France, cost accounting is traditionally called Comptabilité
Analytique d’Exploitation (literally Analytical Business Accounting). Cost
accounting’s purposes are provided in the French Accounting Plan: “On one hand,
it serves to identify the cost of the various functions performed by the firm,
provide a basis for the valuation of certain elements on the balance sheet,
explain the economic result (income) by calculating costs of products (goods
and services) and comparing them to corresponding selling prices. On the other
hand, it serves to forecast the various costs and incomes (standard cost and
budgets, for example), identify and explain variances between forecast and
actual. And, it serves to provide all the information which could facilitate
decision making. In order to achieve these purposes, the analytical business
accounting system must be strictly adapted to the organizational structure of
the firm and to the specific business it is involved in.”
Cost is
defined by the French Accounting Plan as “accumulated charges charged to a
product or a responsibility center”. It can be calculated at any stage of the
creation of a product. The final cost of a product is the Coût de Revient
(previously called Prix de Revient. It includes all charges incurred including
the sales and distribution charges.
The
method is a two-stage process; the firm is viewed as a sequence of stages or
sections called Sections Homogènes (Uniform Sections) through which
material moves as it is processed into a finished product. These sections,
modeled on the production process, are called the Main Sections when they
contribute directly to the manufacture of a product.
The
method looks at the charges by destination: that is, the purpose for which they
are incurred. These resources can be used either by the products for the direct
charges or by the sections for the indirect charges. These last ones, not
directly attributable to a product, are attached to the section that can be
deemed to be the existence’s cause of the charge. Some charges are directly
related to one section, others require an allocation in using a rate
(clé de répartition) based on physical unit of input.
Although the French cost accounting method is a
sophisticated and traditional way to allocate costs in a firm, the assumptions
it is based on can be considered today to be mostly invalidated. Indeed, until
the 70s the markets the firms dealt with was protected, their main function was
the Production, the organization was “top-bottom” only and the main purpose was
to produce as much as standardized products possible (mass-production). The end
of this era and the birth of Activity-Based Costing is a tremendous challenge
for the French cost accounting method.
Reference:
1. Cauvin E. French Cost Accounting Methods: ABC and other
Structural Similarities // Journal of Cost Management, 2007 [Electronic
resource] Access mode: https://hec.unil.ch/docs/files/30/146/journalcost.pdf