IAS 37 (as adopted by EU) · H3C / AMF

IAS 37 Provision Calculator
France

IAS 37 provision assessment with France-specific regulatory guidance, H3C / AMF expectations, and local legal framework considerations.

Obligation Type

Present Obligation

Does a present obligation exist from a past event?

IAS 37 Provision Assessment Toolkit — free PDF

Complete audit toolkit: IAS 37 recognition decision flowchart, measurement methodology guide, discounting worked examples, disclosure checklist, provision type cheat sheet, and journal entry templates.

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IAS 37.14 — A provision shall be recognised when: (a) an entity has a present obligation from a past event; (b) it is probable that an outflow will be required; (c) a reliable estimate can be made.

IAS 37.36 — The amount recognised shall be the best estimate of the expenditure required to settle the present obligation at the end of the reporting period.

IAS 37.39 — Where there is a large population of items, the obligation is estimated by weighting all possible outcomes by their associated probabilities (expected value).

IAS 37.45 — Where the effect of the time value of money is material, the amount of a provision shall be the present value of the expenditures expected to settle the obligation.

IAS 37.72 — A constructive obligation to restructure arises only when an entity has a detailed formal plan and has raised a valid expectation in those affected.

IAS 37 Application in France

France adopted IAS 37 Provisions, Contingent Liabilities and Contingent Assets through EU endorsement. IAS 37 is mandatory for French entities preparing consolidated IFRS financial statements, which includes companies listed on Euronext Paris and groups exceeding the IFRS reporting thresholds. The Autorité des Marchés Financiers (AMF) supervises financial reporting quality for listed entities, while the Haut Conseil du Commissariat aux Comptes (H3C) oversees audit quality. Under French GAAP, provisions are governed by the Plan Comptable Général (PCG), specifically Règlement ANC 2014-03, which refers to provisions as 'provisions pour risques et charges'. The PCG framework for provisions differs from IAS 37 in several important respects, including the recognition of provisions for major repairs (provisions pour grosses réparations) and provisions for charges to be distributed over several periods (provisions pour charges à répartir), neither of which has an equivalent under IAS 37. France's extensive regulatory environment, including the Code de commerce, the Code de l'environnement, and the Code du travail, creates a broad range of legal obligations that may give rise to IAS 37 provisions.

H3C / AMF Regulatory Expectations

The AMF has examined IAS 37 application through its annual report on corporate reporting and has published recommendations on provision disclosures. The AMF has noted that French entities frequently aggregate provisions in a manner that prevents investors from understanding individual obligations, and that disclosure of the assumptions and uncertainties underlying provision estimates is often insufficient. The H3C, as the audit oversight body, has conducted inspections examining how auditors challenge provision estimates and assess the completeness of the provision population. The Compagnie Nationale des Commissaires aux Comptes (CNCC) has issued technical guidance addressing the audit of provisions under both IFRS and French GAAP, including NEP 540 on auditing accounting estimates. The Autorité des Normes Comptables (ANC) issues French GAAP rules through its Règlements, and provides interpretive guidance on the PCG provision requirements. French entities face a complex regulatory landscape where the Code de commerce, the Code monétaire et financier, and sector-specific regulations can all create legal obligations giving rise to provisions.

Practical Guidance for France

French entities applying IAS 37 should be aware of the differences between IFRS provisions and PCG provisions pour risques et charges. Under the PCG, provisions for major repairs (provisions pour grosses réparations) are permitted under Règlement ANC 2014-03, allowing entities to build up provisions for planned major maintenance expenditure. IAS 37 does not permit such provisions because there is no present obligation to a third party — the entity can avoid the expenditure by selling or abandoning the asset. Similarly, PCG provisions for charges to be distributed (charges à répartir) have no IAS 37 equivalent. For measurement, the PCG generally uses undiscounted amounts for provisions, whereas IAS 37.45 requires discounting when the time value of money is material. French entities should use Obligations Assimilables du Trésor (OAT) yields as the basis for the risk-free discount rate under IAS 37. Restructuring provisions under French law must consider the obligations créated by the Plan de Sauvegarde de l'Emploi (PSE), which mandates specific procedures for collective redundancies and may include redeployment obligations, outplacement costs, and enhanced severance beyond the indemnité légale de licenciement.

Audit Expectations

French statutory auditors (commissaires aux comptes) must comply with the Normes d'Exercice Professionnel (NEP) when auditing provisions. NEP 540 on accounting estimates is particularly relevant. The H3C has identified provisions as an area where audit quality requires improvement, with common inspection findings including insufficient challenge of management's assessment of whether an obligation is present, inadequate evaluation of the completeness of litigation and environmental provisions, limited independent assessment of provision measurement assumptions, and failure to evaluate whether PCG-specific provision categories (grosses réparations, charges à répartir) have been appropriately eliminated on consolidation into IFRS. French auditors should obtain letters from the entity's avocats (lawyers) confirming the status and estimated outcomes of material litigation, and should consider the impact of the French legal system's specificities — including the distinction between juridictions civiles and juridictions administratives — on the probability and timing of obligation settlement.

France-Specific Considerations

France-specific IAS 37 considerations include the extensive obligations created by French employment law (Code du travail). The Plan de Sauvegarde de l'Emploi (PSE) for collective redundancies involving 10 or more employees creates detailed obligations including redeployment measures, outplacement support, and enhanced severance payments that must be provided for under IAS 37 when the plan is formally adopted and communicated. The indemnité de départ à la retraite (retirement indemnity) is a specific French obligation that may be treated as a provision or as an employee benefit depending on its nature. French environmental law under the Code de l'environnement, including the régime des installations classées pour la protection de l'environnement (ICPE), imposes obligations on operators of classified installations to remediate sites upon cessation of activity. The Loi relative à la responsabilité environnementale creates strict liability for environmental damage. French entities operating nuclear installations face decommissioning obligations governed by specific legislation (Code de l'énergie), which can give rise to provisions of extraordinary magnitude — EDF's nuclear decommissioning provisions alone exceed tens of billions of euros.

Common Audit Inspection Findings — France

PCG provisions pour grosses réparations not eliminated on IFRS consolidation — provisions recognised under French GAAP that have no basis under IAS 37 were carried forward into consolidated IFRS statements

Restructuring provision recognised before PSE was formally communicated — IAS 37.72 requirement for a valid expectation in those affected not demonstrated

Legal claim provisions measured without obtaining or evaluating avocat confirmations — probability assessment not supported by independent legal evidence

Long-term ICPE environmental remediation provisions not discounted — material overstatement of provision balance

Contingent liability disclosures for ongoing regulatory proceedings insufficient — nature, estimated financial effect, and uncertainties not adequately described

Frequently Asked Questions — France

How does IAS 37 apply in France alongside the Plan Comptable Général?
IAS 37 applies to French entities preparing consolidated IFRS financial statements. French GAAP provisions under the PCG (provisions pour risques et charges) apply in statutory individual entity accounts. Key differences include the PCG's allowance of provisions for major repairs and charges to be distributed, neither of which IAS 37 permits. On consolidation, PCG-specific provisions must be eliminated. The ANC's Règlement ANC 2014-03 governs PCG provisions. French entities must maintain dual provision calculations and reconcile the differences, with the IFRS consolidation adjustments clearly documented.
What does the AMF expect regarding IAS 37 disclosures?
The AMF expects French listed entities to provide disaggregated provision disclosures by nature of obligation rather than presenting a single aggregated provision line. The AMF has recommended disclosure of the key assumptions used in measuring material provisions, quantified sensitivity analysis where estimation uncertainty is significant, clear distinction between provisions and contingent liabilities with explanation of the rationale, and transparent disclosure of any provisions recognised or reversed during the period with the reasons. The AMF has criticised entities that use commercially sensitive exemptions under IAS 37.92 too broadly to avoid informative disclosure.
How does French employment law affect IAS 37 restructuring provisions?
French employment law creates specific obligations through the Plan de Sauvegarde de l'Emploi (PSE), which is required for collective redundancies of 10 or more employees in companies with 50 or more staff. The PSE must include redeployment measures, training, outplacement, and may include enhanced severance beyond the statutory minimum. These obligations create provisions under IAS 37 when the PSE is formally adopted and communicated to employee representatives. The Direccte (now DREETS) must validate or approve the PSE, and the estimated costs of all PSE measures should be included in the restructuring provision.
What environmental provision requirements exist under French law?
The Code de l'environnement creates extensive obligations through the ICPE regime (installations classées pour la protection de l'environnement). Operators of classified installations must remediate sites upon cessation of activity, and prefectoral orders may require remediation during the operational phase. The Loi relative à la responsabilité environnementale implements the EU Environmental Liability Directive, creating strict liability for environmental damage. For nuclear installations, the Code de l'énergie imposes decommissioning obligations that generate some of the largest provisions in French corporate reporting. ADEME (Agence de la transition écologique) provides technical guidance on remediation cost estimation.
What are common H3C inspection findings related to IAS 37 provisions?
The H3C has identified recurring findings including: insufficient challenge of management's probability assessment, particularly for litigation provisions where the auditor accepted the entity's avocat's opinion without independent evaluation, inadequate testing of the completeness of provisions — especially for environmental obligations at subsidiary sites, failure to verify that PCG-specific provisions (grosses réparations) were correctly eliminated on IFRS consolidation, limited assessment of the reasonableness of discount rates applied to long-term provisions, and insufficient evaluation of whether restructuring provisions met all IAS 37.72 recognition criteria including the existence of a detailed formal plan.

IAS 37 Provision Calculator

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