Implementation of International Financial Reporting Standard (IFRS) in Total S.A

This report analyzes the implementation of International Financial Reporting Standard (IFRS) in Total S.A, a France-based oil and natural gas company. It discusses the adoption of IFRS, critical analysis, treatment of employee benefits, closing period, and net income recognition. The report highlights the importance of IFRS and the difference between IFRS and French accounting standards. It concludes that the implementation of IFRS will help companies record financial transactions and prepare financial statements in a friendly manner.

Running head: ACCOUNTING
Accounting
Name of the Student:
Name of the University:
Authors Note:

2ACCOUNTING
Table of Contents
Introduction:...............................................................................................................................3
Adoption of IFRS.......................................................................................................................3
Critical analysis:.........................................................................................................................3
Treatment of employee benefits:................................................................................................4
Closing period and net income recognition:..............................................................................6
Conclusion:................................................................................................................................7
Reference....................................................................................................................................8

3ACCOUNTING
Introduction:
This report contains details analysis of implementation of International Financial
Reporting Standard (IFRS), which were issued by the International accounting standards
board (IASB). In the year the 2014, the European Union decided to apply IFRS for the
preparation and presentation of the financial statement by December 31. TOTAL S.A is a
FRANCE based renowned oil and natural gas Sector Company, which has a great control
over the world market (Oulasvirta, 2014).
Adoption of IFRS
After the adoption of the IFRS by the EUROPIAN union, the company also adopted
the policy. The companies are adopting the IFRS because of high quality, internationally
recognised set of accounting standards. That brings transparency and accountability of all the
financial data this builds up efficiency of the financial statement. IFRS enhance the
transparency and the comparability of the financial statements with the other international
companies, as the financial statements are prepared based on the same principal. Further, the
IFRS attaches all the relevant data for the preparation of the financial statements, which
delivers a perfect view to the users about the efficiency, and the viability of the company.
Critical analysis:
Before the application of the IFRS, the FRANCE companies used to follow the
regulations that are issued by France accounting standards board. Recently the financial
reporting of the individual companies and consolidated group levels are affected by the
reformation of the FRENCH accounting standards and standard setting bodies (Christensen et
al. 2015). This dual reporting system enables the individual company to report by the use of

4ACCOUNTING
the national reporting system. This means the company’s will be required to prepare financial
statement based on French accounting standards. Whereas some the group companies (listed)
have to report by the use of IFRS. TOTAL S.A is a listed company and it has subsidiaries all
over the world therefor the company has obligations to prepare financial statement by
applying the IFRS for the better understanding and comparability of them. Further, in IFRS
the company has to make some changes in the accounting treatments, which is beneficial for
them, as they will display a better situation of the financial statements. The culture and
historical context influence the reporting procedure of the any country. France had no explicit
'conceptual framework' from which accounting doctrine could evolve; accounting rules and
the public authorities mainly enacted regulations. Total S.A being a listed entity in the
FRANCE has to apply IFRS; because of this, some differences could be observed (Nobes,
2014).
Treatment of employee benefits:
In the treatment of employee benefits expenditure the accounting is done differently,
GAAP (generally accepted accounting principles) references FRS 17 and IAS 19, which is
issued by the International Financial Reporting Standard (IFRS). In both the standards they
have to value the employee benefits but the procedure of treatment is different (Chatfield and
Vangermeersch 2014). If TOTAL S.A FOLOWS THE FRENCH accounting procedure then
it will recognise all the benefits but not the share-based payments which, in general known
as the employee share based payments (ESOP). Whereas in GAAP, derives the type of
benefits and the procedure of treatment is for tax implication purpose. Further GAAP remains
silent in terms of treating this as operating expenses (Albu et al. 2014). Which means the
expenses of share based employee benefits are to be deducted from the gross profits which
will affected the gross profit margin statement of employee shareholding on the last day of

5ACCOUNTING
the fiscal year chapter 6.4.2, financial statement of TOTAL ), as this will display lower gross
profits as compared to the French companies. Nevertheless, in the final preparation the net
profits will show the exact same value after considering all the expenses. Further the expert
surveyor by conducts the process of valuation under GAAP the valuation on actuarial basis.
Where as in IFRS the accounting period in which the benefits are provided, are treated
differently. The expenses are generally recognise in the STRGL (Statement of Recognised
Gains and Losses) in the period in which they are incurred. In addition, the treatment of
procedure of this is deferred tax liability. The IFRS provides time flexibility as this provides
12 months period for the recognition and the accounting treatment (Shenkar et al. 2014). For
TOTAL S.A it is a great advantage as the company has around 98277(2017) employees it
must require time to deal with the benefits that the company had provide to the employees.
By the implementation of the IFRS it is found that the numbers of shares that are held by the
group of employees directly or indirectly wrongly includes the shares of TOTAL LTD which
are held by the former employees (2.8 million shares)

6ACCOUNTING
Figure 1: Employee Shareholding
(Source: Oulasvirta 2014)
Closing period and net income recognition:
IFRS not only treat differently the employee benefit expenses in accounting rather
there are several key business accounting treatment that differs by the implementation of the
IFRS and French GAAP which is used in the French accounting body. In the recognition
terms revenue, the expenses, the accounting period, and the quantum of revenue are valued
by fair valuation of the asset or liability after the elimination of the liabilities to the parties
under IFRS. Both the IAS 18 ad FRS 5 suggested that. GAAP is a narrower concept as this
only considers the supply of goods and services to the customer, whereas at the same time the
income form the interest form the assets, royalties and dividends are considered in the IFRS.
In French accounting is less participative as the recognition of the revenue from the sale of
goods (Hoyle et al. 2015). The revenue recognised only when the entity has the right to
consideration. However, in IFRS, the sale leading has strict criteria that must adhere to before
the recognition. There are different methods of recognition of the revenues from the sources
like interest, royalty, and dividends. In France accounting practise the revenues from the
interest, royalties and dividends or from other source are recognise the constant return on the
value of the asset whereas the IFRS suggest effective interest method in which the income is
recognise by discounting of the bonds. In the financial year, the TOTAL limited has booked
497 million of dividend income derived from the subsidiaries, and from the other source of
income, which is valued on the discounting of the bonds (Schaltegger et al. 2017).

7ACCOUNTING
Figure 2: Other financial income
(Source: Oulasvirta 2014)
Conclusion:
From the above analysis, the importance of IFRS and the difference of the IFRS and
the French accounting standards is elaborated. The companies, which are recognised in the
stoke market, are to opt the IFRS accounting standers for the greater accessibility,
comparability and the transparency. The implementation of the IFRS will help the companies
to record the financial transaction and preparation the financial statements in friendly manner.

8ACCOUNTING
Reference
Albu, C.N., Albu, N. and Alexander, D., 2014. When global accounting standards meet the
local context—Insights from an emerging economy. Critical Perspectives on
Accounting, 25(6), pp.489-510.
Chatfield, M. and Vangermeersch, R., 2014. The history of accounting (RLE accounting): an
international encylopedia. Routledge.
Christensen, H.B., Lee, E., Walker, M. and Zeng, C., 2015. Incentives or standards: What
determines accounting quality changes around IFRS adoption?. European Accounting
Review, 24(1), pp.31-61.
Hoyle, J.B., Schaefer, T. and Doupnik, T., 2015. Advanced accounting. McGraw Hill.
Louwers, T.J., Ramsay, R.J., Sinason, D.H., Strawser, J.R. and Thibodeau, J.C.,
2015. Auditing & assurance services. McGraw-Hill Education.
Nobes, C., 2014. International classification of financial reporting. Routledge.
Oulasvirta, L., 2014. The reluctance of a developed country to choose International Public
Sector Accounting Standards of the IFAC. A critical case study. Critical Perspectives on
Accounting, 25(3), pp.272-285.
Schaltegger, S., Burritt, R. and Petersen, H., 2017. An introduction to corporate
environmental management: Striving for sustainability. Routledge.
Shenkar, O., Luo, Y. and Chi, T., 2014. International business. Routledge.