Impairment Calculator
France

IAS 36 impairment testing in France: IAS 36 as adopted by the EU (for IFRS reporters); French GAAP (PCG/ANC regulations) for non-IFRS reporters

France's financial reporting framework requires listed entities to prepare consolidated financial statements under EU-adopted IFRS, including IAS 36. Non-listed entities use the Plan Comptable Général (PCG) as modified by the Autorité des Normes Comptables (ANC), which takes a fundamentally different approach to impairment. Under French GAAP, fixed assets are tested for impairment when indicators exist, but the methodology is less prescriptive than IAS 36. The PCG requires comparison to "valeur actuelle" (current value), defined as the higher of market value and value in use, but doesn't mandate a specific DCF methodology for VIU. Goodwill under French GAAP is amortised over its useful life (with no maximum period specified, though the ANC recommends a presumption of 10 years), and impairment testing is indicator-based rather than annual. French companies listed on Euronext Paris include some of Europe's largest groups (CAC 40 companies carry hundreds of billions in goodwill collectively) and a substantial mid-cap segment on Euronext Growth. For auditors, French impairment engagements often involve complex group structures with CGUs spanning multiple countries, intercompany transactions that complicate CGU cash flow isolation, and significant intangible assets (brands, concession rights, customer relationships) that require separate impairment assessment. France's strong tradition of concession-based businesses (toll roads, water utilities, airport operators) creates specific impairment considerations around finite-life concession intangibles.

Regulatory context: Autorité des Marchés Financiers (AMF); Haut Conseil du Commissariat aux Comptes (H3C) for audit oversight

The AMF reviews annual reports of listed companies and publishes annual recommendations on financial reporting. Its 2023 recommendations report specifically addressed impairment testing, noting that many companies' IAS 36.134 disclosures remained insufficient. The AMF found that companies often disclosed the discount rate and terminal growth rate but failed to disclose the basis for key cash flow assumptions (revenue growth, margin evolution) or to provide meaningful sensitivity analysis. The AMF has been particularly focused on the consistency between companies' strategic narratives (investor presentations, management commentary) and their IAS 36 assumptions. Where a company presents an optimistic growth story to investors but uses conservative assumptions in the impairment model, or vice versa, the AMF has queried the inconsistency. H3C (the French audit oversight body, which took over from the former Haut Conseil du Commissariat aux Comptes) has identified impairment of goodwill as a recurring topic in its inspection reports. H3C's 2022 inspection findings noted that French audit firms frequently performed insufficient work on discount rate validation, particularly for CGUs in emerging markets where French groups (especially in infrastructure, luxury goods, and retail) have significant operations. H3C also noted that junior team members were sometimes assigned to evaluate impairment models without adequate supervision from experienced staff, leading to superficial review of management's assumptions.

Practical guidance for France

French entities derive discount rates using eurozone inputs consistent with the German and Dutch approaches: OAT (Obligations Assimilables du Trésor) yields for the risk-free rate (typically close to German Bund yields, with a spread of 30 to 60 basis points), European equity risk premiums, and industry betas from Euronext-listed comparables. The French actuarial and valuation profession has specific guidance through the Compagnie Nationale des Commissaires aux Comptes (CNCC) practical notes, which provide examples of WACC derivation and VIU modelling. French auditors should be familiar with these CNCC technical publications, as H3C inspectors reference them as expected practice. For the forecast period, French corporate governance requires the supervisory or management board to approve strategic plans. These plans form the IAS 36.33(a) basis. French companies in the concession sector (autoroutes, water, waste management) often have contractual cash flows extending 20 to 30 years, justifying longer forecast periods under IAS 36.33. The terminal growth rate should reflect the French economic outlook (Banque de France projects long-term nominal GDP growth at approximately 1.5% to 2.0%) weighted for international exposure.

Audit expectations

H3C inspectors expect French auditors (commissaires aux comptes) to document their challenge of each key VIU assumption independently. Given France's dual-auditor system for large companies (co-commissariat aux comptes), H3C also expects both firms to demonstrate substantive engagement with the impairment analysis rather than one firm deferring to the other. For companies where impairment testing is identified as a key audit matter (KAM), H3C scrutinises whether the KAM description in the audit report reflects the actual audit work performed. Generic KAM language about "testing key assumptions" without specifics has been flagged as insufficient.

France-specific considerations

French tax law creates interactions with impairment that differ from other jurisdictions. Goodwill (fonds de commerce) is not amortisable for French corporate income tax purposes for acquisitions completed after 1 January 2016. Impairment losses on goodwill are tax-deductible only if the impairment is definitive and irreversible, a higher threshold than IAS 36's accounting test. This creates a permanent difference rather than a timing difference, which means no deferred tax asset arises from the accounting impairment. Auditors should verify that the entity's IAS 12 treatment correctly reflects this French tax position. France's Cotisation sur la Valeur Ajoutée des Entreprises (CVAE, a local business tax based on value added) is affected by asset base changes, including impairment. An impairment charge that reduces the entity's fixed assets may affect CVAE calculations in subsequent periods. While this doesn't directly affect the IAS 36 test, it's a practical consequence that management should be aware of when evaluating the downstream effects of recognising an impairment loss.

Common inspection findings

Discount rates were not updated for current market conditions, with some firms using rates from the prior year without reassessment (H3C inspection 2023)

Junior staff assigned to impairment model evaluation without adequate senior supervision, leading to superficial challenge of management's assumptions (H3C inspection 2022)

Inconsistency between growth assumptions in the VIU model and the growth narrative in management's investor presentation, without auditor investigation (AMF review 2023)

Co-commissaires aux comptes failed to demonstrate that both firms independently assessed impairment testing assumptions (H3C inspection 2022)

IAS 36.134 disclosures omitted the basis for key cash flow assumptions, disclosing only the discount rate and terminal growth rate without revenue or margin details (AMF recommendations 2023)