IFRS 15 Revenue Flowchart — France Edition

IFRS 15 in France

IFRS 15 Adoption in France

France adopted IFRS 15 Revenue from Contracts with Customers through the EU endorsement mechanism, effective for annual periods beginning on or after 1 January 2018. French entities listed on Euronext Paris and other regulated markets must apply EU-endorsed IFRS 15 in their consolidated financial statements. The standard was endorsed without modifications and applies identically to the IASB-issued version. Non-listed French entities preparing individual financial statements apply the Plan Comptable Général (PCG), the French national accounting framework maintained by the Autorité des Normes Comptables (ANC). Under PCG, revenue recognition continues to follow traditional French accounting principles based on the transfer of risks and rewards and the completion of the sale (achèvement de la vente), which differ materially from the IFRS 15 control-transfer model. French entities with diverse legal structures, including sociétés anonymes (SA), sociétés par actions simplifiées (SAS), and sociétés à responsabilité limitée (SARL), must determine which reporting framework applies to their specific entity-level and group-level reporting obligations.

AMF Reporting Recommendations

The Autorité des Marchés Financiers publishes annual recommendations on the preparation of financial statements by listed entities, and revenue recognition under IFRS 15 has been a regular feature of these recommendations. Key AMF guidance includes the need for entity-specific revenue recognition policy descriptions that explain how each step of the five-step model applies to the entity's specific contracts, clear disclosure of significant judgements affecting the timing and amount of revenue recognised, transparent presentation of the impact of IFRS 15 on alternative performance measures (APMs) such as EBITDA and operating margin, and adequate disaggregation of revenue by category that provides insight into the nature and timing of revenue streams. The AMF has specifically noted concerns about the quality of disclosures for construction and real estate contracts, telecommunications bundled offerings, and defence and aerospace long-term programmes, all of which are significant sectors in the French economy.

French GAAP Alternative: Plan Comptable Général

The Plan Comptable Général governs individual entity financial statements in France and does not incorporate IFRS 15. Revenue recognition under PCG follows the principle of prudence (principe de prudence) and the completion of the transaction. For sales of goods, revenue is recognised when legal title transfers, which typically coincides with delivery. For rendering of services, PCG permits the percentage-of-completion method (méthode à l'avancement) or completed-contract method (méthode à l'achèvement) depending on the reliability of outcome estimation. The ANC has not proposed to converge PCG revenue recognition with IFRS 15, and significant differences remain. French dual reporters must maintain separate revenue recognition processes for PCG individual accounts and IFRS 15 consolidated financial statements, creating reconciliation requirements.

H3C Audit Inspection Findings

The Haut Conseil du Commissariat aux Comptes, as the French audit oversight body, has conducted inspections that have identified deficiencies in the audit of IFRS 15 revenue recognition. Key H3C findings include insufficient understanding by Commissaires aux Comptes of the entity's contracts and business model underlying revenue recognition, limited testing of the identification and separation of performance obligations in bundled arrangements, inadequate challenge of management's determination of standalone selling prices used in transaction price allocation, and failure to evaluate the appropriateness of input or output methods used for over-time revenue recognition in construction and engineering contracts. The H3C has emphasised that revenue recognition must be treated as a significant audit risk and that Commissaires aux Comptes must perform substantive procedures that go beyond the testing of internal controls over the revenue cycle.

French Company Types and IFRS 15 Applicability

The French corporate landscape includes several legal forms with different reporting requirements. Sociétés anonymes (SA) listed on Euronext Paris must apply IFRS 15 in their consolidated financial statements. Sociétés par actions simplifiées (SAS), which are widely used by French technology companies and subsidiaries of foreign groups, may prepare consolidated statements under IFRS if they choose or if they are part of a listed group. Sociétés à responsabilité limitée (SARL), the most common form for small businesses, typically report under PCG only. The choice of legal form affects the IFRS 15 reporting obligation, and entities transitioning from PCG to IFRS must assess the impact of IFRS 15 on their previously reported revenue figures, particularly for long-term contracts and multi-element arrangements.

Industry-Specific Considerations: Defence, Aerospace, and Luxury

France has major industries in defence and aerospace (Thales, Safran, Airbus), luxury goods (LVMH, Kering, Hermès), and telecommunications (Orange), each presenting distinct IFRS 15 challenges. Defence and aerospace companies typically enter into long-term contracts with governments and agencies that may span multiple years and include significant variable consideration through incentive fees, penalties, and cost escalation mechanisms. The assessment of whether these contracts qualify for over-time revenue recognition under IFRS 15.35 requires analysis of the alternative-use restriction and the enforceable right-to-payment condition under French contract law. Luxury goods companies must assess the treatment of licensing royalties, consignment arrangements, and wholesale versus retail channel revenue recognition. Telecommunications companies face complexity in allocating the transaction price across handset and service elements in bundled subscriber contracts.

Regulatory Inspection Focus Areas

H3C inspections have identified insufficient auditor understanding of entity contracts for performance obligation identification, limited testing of standalone selling price determinations, and inadequate challenge of over-time recognition methods. AMF thematic reviews found that entities provide insufficiently entity-specific revenue policy disclosures and inadequate disaggregation of revenue, particularly in the construction, telecommunications, and defence sectors.