French-language FEC and group reporting: reconciling French GAAP and US GAAP

Quick answer. A French subsidiary keeps statutory books under French GAAP (PCG), with an FEC labelled in French that can be produced during an audit (article L47 A of the LPF). The US GAAP or IFRS group reporting is then obtained through a reconciliation table, without a second set of books or double entry.

The director of a foreign group opening a French subsidiary quickly meets a concrete tension. On one side, the French authorities expect books kept in French, in euros, under French GAAP, with an accounting entries file available in case of an audit. On the other, the parent demands a monthly reporting package under the group's standards, most often US GAAP or IFRS, in its own currency and timetable. The wrong answer is to run two parallel sets of books. The right approach keeps one ledger and reconciles.

At Hayot Expertise, a firm registered with the Ordre des experts-comptables of Ile-de-France, this is a situation we meet regularly in subsidiaries of US or UK groups. The stake is not theoretical: double entry creates gaps, lengthens the close and weakens the audit trail.

Any company keeping its accounts on a computerised system must be able to produce an accounting entries file (FEC) during an audit, under article L47 A II of the Tax Procedures Code (LPF). This file is the first item the authorities review during an audit of computerised accounts.

Two requirements shape this file for a French subsidiary:

• The FEC is expected in French, with account labels in French, in line with the obligation to keep accounting documents produced to the authorities in the French language (article 54 of the CGI).
• The accounts are kept in euros, under French GAAP from ANC regulation No. 2014-03.

In other words, a group cannot simply export its group ledger in English and present it as compliant. The local framework and the French language apply to the statutory accounts, the tax return and corporate income tax. For a reminder of the French accounting principles underlying this bookkeeping, French GAAP remains the reference.

Our reading#

The FEC is not an export formality. It is the backbone of local compliance. We configure it from the moment the subsidiary opens, even before the first close, because a poorly structured FEC (English labels, accounts outside French GAAP, faulty sequencing) is hard to fix afterwards and exposes the company to a rejection of its accounts during an audit.

The method we apply rests on a simple rule. Bookkeeping happens once, under French GAAP. From this single base flow two deliverables:

1. The French statutory accounts (balance sheet, income statement, tax return, French-language FEC).
2. The group reporting package (US GAAP or IFRS), produced through adjustment and reconciliation.

This logic avoids the second entry and ensures both frameworks start from the same set of entries. It is also the condition for the group auditor to tie the package back to the local accounts. The same philosophy guides our approach to a multi-country chart of accounts and intercompany accounts within international groups.

Reconciliation requires knowing the points of divergence between the frameworks. Without going into figures, which depend on each contract and situation, here are the most frequent adjustment areas in our files.

These areas are points of vigilance, not universal recipes. Each adjustment must be documented, justified and stable from one period to the next. When the group aims at consolidation, adopting IFRS often clarifies the target framework for reporting.

The underestimated risk#

The costliest gap is not technical, it is organisational. When the subsidiary enters its transactions twice, once locally and once in the group tool, the two sets diverge over the months. The close then becomes a painful reconciliation exercise, and the group auditor loses the trail between the package and the French accounts. The reconciliation table removes this risk at the root.

Here is the sequence we run for a French subsidiary kept under French GAAP and reporting to a foreign parent.

1. Keep the local books under French GAAP. A single statutory ledger, in French and euros, under ANC regulation 2014-03, which feeds everything. This is the scope of statutory bookkeeping and accounting review.
2. Generate a compliant FEC labelled in French. The software must produce an FEC that can be handed over under article L47 A of the LPF, with French labels.
3. Map the French GAAP versus US GAAP or IFRS differences. List and document each treatment divergence with a stable rule.
4. Build a chart-of-accounts reconciliation table. Link each French GAAP account to the group account through a mapping, and post adjustments only in the package, never in the FEC.
5. Produce the package under the parent's standards. Generate the package from the adjusted French GAAP trial balance, in the group's currency and timetable, with the reconciliation table attached.
6. Automate via a tool and a mapped chart of accounts. Industrialise the mapping so a single entry automatically feeds the French FEC and the group package, with an accounting tool such as Pennylane.

In practice#

In our files, the reconciliation table takes the form of a line-by-line mapping between the French GAAP trial balance and the group chart of accounts, completed by a clearly isolated block of adjustment entries. The group auditor reads this block as a bridge: starting from the French statutory result, adding the adjustments, and arriving at the group result. This structure makes the close fast and the audit transparent.

Recently, the European director of a French subsidiary of a US group came to us because his teams were entering transactions twice: once for the group's US GAAP package, once for the French accounts. The result was unexplained gaps at every close and an FEC partly in English. We switched to a single French GAAP entry, reconfigured the FEC in French and built a reconciliation table towards the group framework. Double entry disappeared, and the bridge between local accounts and group package became auditable.

This pattern is common for the accounting and VAT of a French subsidiary of a US LLC, where the coexistence of both frameworks is the norm. Support from a chartered accountant familiar with foreign groups secures both local compliance and reporting quality.

• The FEC remains the item reviewed first during an audit; a non-compliant file (non-French labels, accounts outside French GAAP) weakens the whole set of accounts.
• Group adjustments must never pollute the statutory accounts: they live in the reporting package, not in the FEC.
• Corporate income tax is computed on the French accounts (French GAAP), at the standard rate of 25 % and the reduced rate of 15 % on the first 42,500 EUR of profit for eligible SMEs (article 219-I-b of the CGI), not on the US GAAP result.

What the authorities look at#

During an audit of computerised accounts, the authorities first check the FEC: presence, format, French language, consistency with the tax return. A group report in English never replaces this file. The reconciliation table is not requested by the authorities but protects the director should questions arise on the gap between local accounts and figures sent to the group.