Management Accounting in France France has a well-developed set of financial accounting rules, as embodied in the Plan Comptable Général (PCG). The French PCG is comparable to U.S. GAAP. You may not have realized it, but the cost accounting for manufacturers we have studied in this chapter has a very clear connection to the way financial accounting is reported. Exhibit 1 in the text visibly demonstrates the difference between the production process and the administration process in a manufacturing organization. U.S. cost accounting makes a clear functional distinction between costs related to the production process (e.g., direct materials, direct labor, and manufacturing overhead) versus the administration process (e.g., selling costs and general administration costs). Further, Exhibit 6 in the chapter demonstrates that the flow of direct materials costs and direct labor costs through the accounting system, as well as the allocation of manufacturing overhead costs, allows U.S. companies to determine product costs and easily compute cost of goods sold for financial reporting purposes. However, cost accounting (comptabilité analytique)

in France is explicitly decoupled from financial accounting, as defined by the PCG. What this means is that the chart of accounts French companies use for cost accounting is completely different from the chart of accounts used for financial accounting. The reason is not necessarily because French companies perform cost accounting differently from U.S. companies, but that the nature of French financial accounting is quite different from financial accounting in the United States. The PCG requires financial accounting reports in France to organize and report costs by their inherent nature (materials, labor, depreciation, etc.). Costs are not assigned to products or to departments. Hence, one wouldn’t expect to see a French company report Cost of Goods Sold or Selling and General Administrative Expense.

Think about this for a moment. If costs are not being assigned to products, departments, or operations within the organization, how does the organization perform the management processes of planning, controlling, and evaluating? Actually, French companies do not have a tradition of using costs to manage their companies. In fact, the traditional phrase used in France to describe the techniques and practices of planning, control, and evaluation has been contrôle de gestion, literally, “management control.” The absence of the word comptabilité (accounting) in this phrase is significant: it indicates that accounting numbers play a limited role in managerial reporting systems in France. Only very recently has the phrase comptabilité de gestion become more common. French business has had a long tradition of being led by engineers, not by accountants and financiers. Even today some 50% of managing directors in France are engineers by profession or training.
Costs are not being used as the main tool for managing companies in France. Given that a large number of the management executives of French companies have engineering backgrounds, how do French companies handle the management processes of planning, controlling, and evaluating (e.g., what kinds of numbers and reports might you expect to find in a French company)? Would you expect that French companies reconcile their comptabilité
analytique systems with their financial accounting systems, as U.S. companies typically do?
Source: Reprinted from A. Roberts, “Management Accounting in France,” Management Accounting (UK), March 1995, pp. 44–46, by permission of the publisher Academic Press Limited, London.