A Comparative Analysis of American and French Financial Reporting Philosophies: The Case for International Accounting Standards

Abstract

ABSTRACT Two very dominant financial reporting systems compete today in the international accounting arena: the Anglo-Saxon model of financial reporting and the continental European model. Adopted and extended by the American financial reporting system, the Anglo-Saxon model is riding the wave of world market globalization and it is consolidating its presence on the international scene. On the other hand, the European model, at least in its Latin-German school, strives to maintain its own international position and tries even hardly to grow beyond its own traditional boundaries. Both models, rooted in a rich history and a strong cultural environment, differ at both substantive and philosophical levels. The impact of the industrial revolution and the protestant thinking is more visible in the Anglo-Saxon financial model, while the impact of law and the major wars is more noticeable in the continental European model. This paper uses the American financial reporting model to represent the Anglo Saxon model and the French reporting model to represent the dominant European model. It questions the ability of either of these models to respond to the needs of international users for financial information and advocates that the most viable alternative to these models lies in a strong commitment to worldwide standards.