Like many tax authorities around the world, France has implemented a statutory reporting framework intended to standardize the financial data they receive from companies under their jurisdiction. It’s called “Fichier des écritures comptables”, or FEC for short.
Introduced in 2014, France’s FEC is part of a broader move toward standards set forth by the Organization for Economic Co-operation and Development (OECD). That body has created guidelines for what it calls “Standard Audit File for Tax” (SAF-T), a method for reliably exchanging standardized electronic accounting data.
While the FEC deviates slightly from the OECD standard, – the underlying requirements are similar. What makes FEC different from the SAF-T standard is that it requires companies to map their financials to a national chart of accounts defined by French authorities.
In addition to providing general ledger balances and supporting journals, compliance with FEC also requires companies to report on accounts payable (including both vendor master data and invoices), accounts receivable (including customer master data and invoices), inventory, and fixed assets.
Let’s drill down on the GL reporting requirement: From a management perspective, most companies prefer to work with a chart of accounts that offers a meaningful lens through which they can understand their business. Accordingly, they create accounts for revenue, expenses, assets, and liabilities in whatever way is most useful from a management reporting perspective.
Later, when it comes time to report to tax authorities, that chart of accounts doesn’t necessarily work well. The FEC reporting requirement, for example, stipulates that companies must map their journals to a very specific chart of accounts designated by French authorities. That leaves companies with the unenviable task of mapping and translating their useful and meaningful account structure to a statutory chart used only for tax purposes.
In fact, there are several other reasons why management’s chart of accounts might not line up with the statutory chart defined by tax authorities. If you’re operating in multiple countries, for example, and if each of those countries requires tax reporting that conforms to its own unique statutory chart of accounts, then it’s impossible to create a single chart that will satisfy everyone’s needs. The UK, for example, recently signaled their intentions to follow France’s example, expanding their “Making Tax Digital” (MTD) initiative to include corporate income tax.
The upshot is that statutory reporting may require that the same set of financial results be mapped and formatted in a variety of ways to support different tax authorities. That could potentially include adjustments to each country’s report that reclassify certain categories of expense, or which omit disallowed expenses altogether. Adjustments to conform to US-GAAP, IFRS, or country-specific standards are good examples of this.
All that mapping and adjustment is burdensome if you’re just doing it once, – and it exposes the company to compliance risk.
Doing it multiple times, though, is extraordinarily time-consuming. It also involves much higher levels of compliance risk because the likelihood of errors increases exponentially.
Mondial helps multinational enterprises solve this problem. Our platform provides a unified system of record for group companies, reading detailed transactional data from multiple companies, even if they’re running different ERP systems. It offers a single version of the truth, giving finance teams the flexibility to map to any statutory chart, make adjusting entries for multi-GAAP reporting, and perform currency revaluations. That leads to fast, accurate reports for any country, any accounting standard, any currency, and any time period. From any ERP system.
If you’re struggling with statutory reporting compliance, schedule a conversation with one of our financial reporting experts. In 30 minutes, we can help you determine whether Mondial may be the right fit for your organization.