ISSUES IN ACCOUNTING EDUCATION American Accounting Association

Vol. 28, No. 2 DOI: 10.2308/iace-50376

2013
pp. 221–234

A French Experience of an IFRS Transition

Carole Bonnier, Frédéric Demerens, Christopher Hossfeld, and Anne Le Manh
ABSTRACT: In 2005, IFRS became mandatory for consolidated financial statements of
French-listed companies. Our students had increasingly international backgrounds,
internships, and jobs after graduation. Therefore, we felt the need to modify our French
GAAP-based introductory accounting class to a course using IFRS. This article describes the
challenges we faced and the solutions we adopted. Since French GAAP are rules-based and
IFRS principles-based, the adoption of IFRS modified our learning goals, the learning strategy,
and the assessment methods. We changed from a bookkeeping-oriented approach to one in
which students have to define and analyze various transactions with respect to the conceptual
framework using broader economic and financial concepts. We also had to modify student
behavior from a learning attitude of repeating answers to one of finding answers, which meant
further developing their analytical, synthesis, and judgment skills. Class material had to be
adjusted to better reflect the complex reality and to allow students to make judgments, thus
raising the question to what degree of detail certain topics are taught. This new approach also
raised challenges in terms of providing feedback to students, grading, and student evaluation.
By raising awareness about these issues, we want to contribute to a smoother transition when
switching accounting classes from local GAAP to IFRS in other countries.
Keywords: accounting education in France; bookkeeping vs. financial reporting; GAAP
change; IFRS accounting education; principles-based accounting.

INTRODUCTION

T
his paper is about our experience of a GAAP change in an introductory accounting class at
ESCP Europe, which is a leading European business school and the oldest in France
(founded in 1819). In 2005, IFRS became mandatory for the consolidated financial
statements of French listed companies. Therefore, we had to decide whether to switch our
accounting classes to IFRS. This decision was not easy given that French GAAP is still relevant for
the individual financial statements of all French companies and the consolidated financial
statements of unlisted companies (PricewaterhouseCoopers [PwC] 2006). Even today, French
GAAP is used by millions of companies (especially small- and medium-sized enterprises [SMEs]).1

Carole Bonnier is an Associate Professor at ESCP Europe Paris, Frédéric Demerens is an Associate Professor
at Novancia Business School Paris, Christopher Hossfeld is an Associate Professor at ESCP Europe Paris,
and Anne Le Manh is an Assistant Professor at ESCP Europe Paris.

Published Online: December 2012

1
In 2009 there were 2.8 million legal entities in France (Béguin et al. 2012). All legal entities have to use French
GAAP for their individual financial statements.

221
222 Bonnier, Demerens, Hossfeld, and Le Manh

Over the last ten years, there have been several changes in the characteristics of our student
body: a significant increase in the proportion of foreign students, a more European or international
curriculum for the majority of students, and greater exposure to IFRS in their future jobs because
they mostly work for large firms, usually listed ones. Because of these changes and the importance
of listed companies for the school (research, funding, student employment), we have changed all
our accounting classes from French GAAP to IFRS. For this paper, we will take the introductory
accounting class as a representative example to discuss this shift.
During a transition period we taught mainly French GAAP together with some comparisons to
IFRS, but the complete shift to IFRS was made in September 2009. The challenge was enormous
because it involved 350 students taught in 14 sections2 with eight full-time faculty members and six
adjunct professors. All sections were and still are taught in French.
The remainder of this paper is organized as follows: The next section is devoted to the
characteristics of French GAAP and their consequences on teaching methods. This is followed by a
presentation of the changes in the make-up of the student body at ESCP Europe and how they
modified our pedagogical objectives. The pedagogical issues that arose in relation to the change are
then described. The last part of the paper provides a summary and discussion of the results.

A SHORT HISTORY OF PAST ACCOUNTING RULES IN FRANCE

In this section we offer a brief summary of the French accounting system, and we explain why
French GAAP can be considered rules based and how this affected our way of teaching before
moving to IFRS.

The French Accounting System

Accounting regulation has been an issue in France for a long time. Indeed, the first written law
on accounting for commercial entities was enacted in the 17th century by Colbert, the finance
minister of Louis XIV. Academics have proposed classifications of accounting systems around the
world (Nobes 1998; D’Arcy 2001) in which France is often regarded as belonging to the
‘‘continental European countries’’ category. Most of the characteristics attributed to ‘‘continental
European countries’’ can be found in France: traditional Roman law, the major influence of the
government in accounting regulation, the influence of taxation rules, and the weakness of financial
markets.
Current French accounting rules derive from the General Accounting Plan (Plan Comptable
Général [PCG]), the first version of which was written in 1947 by a commission of experts. A
government agency, the National Accounting Council,3 was formed soon after in order to
implement the PCG. Today, the French standard-setter is still a government agency, but its
members come from all constituents who have an interest in accounting, not only preparers,
auditors, investors, and academics, but also representatives of other government agencies.
The PCG primarily concerns individual accounts and must be applied by all companies, listed
or otherwise, regardless of their size. It is regularly amended by regulations issued by the French
standard-setter. Consolidated financial statements are treated in a specific regulation (Accounting
Regulation Committee [ARC] 1999). While listed companies must publish their consolidated
financial statements under IFRS according to a European regulation (see below), unlisted
companies can use either IFRS or the aforementioned French regulation. It is important to point out

2
The detailed numbers per year are available upon request from Professor Hossfeld (chossfeld@escpeurope.eu).
3
In January 2010, the name of the French standard-setter changed to ‘‘Accounting Standards Authority.’’

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A French Experience of an IFRS Transition 223

that the use of IFRS is not based on a French decision but is the result of a European process that
started decades ago.
The European community issued directives to harmonize accounting standards (Council of the
European Union 1978, 1983). They have been unsuccessful in providing comparable financial
statements across Europe (Haller and Kepler 2002). During the nineties, internationally accepted
financial information became an issue for large European companies, many of which were listed on
a foreign stock market. Some European countries, like Germany, started to accept the use of U.S.
GAAP or IFRS for cross-listed companies. This led to a confused situation where different GAAPs
co-existed in some countries and pressure was put on the European Parliament to clarify EU
accounting regulations. As a consequence, the European Parliament issued a regulation in July 2002
requiring European companies that are publicly traded on a European stock market to apply IFRS
by 2005 for their consolidated financial statements (EC 2002).
To be legally effective, the implementation of IFRS in the European Union required a specific
endorsement process. After publication by the IASB, each IFRS is submitted to a private technical
body, the European Financial Reporting Advisory Group (EFRAG), which gives the European
Commission its opinion on whether the standard is consistent with the European directives of 1978
and 1983. EFRAG’s opinion is first submitted to the Standards Advice Review Group (SARG),
whose members are nominated by the European Commission, which gives its view on whether
EFRAG’s opinion is well balanced and unbiased. Based on the opinions of EFRAG and SARG, the
European Commission writes a first-draft endorsement regulation that is submitted to the
Accounting Regulatory Committee (ARC), a political committee composed of representatives from
member states, which makes its own decision on the standard (acceptance or rejection). If ARC
recommends the adoption of the standard, the draft endorsement regulation is submitted to the
European Parliament and the Council of the European Union. If these institutions do not oppose the
new standard within three months, the European Commission adopts the new regulation and
publishes it in the European Official Journal, which is translated4 into the 23 official languages of
the European Union (including French).5 Consequently, the new IFRS becomes mandatory in all
EU countries.
In addition to the requirement to use IFRS for the consolidated financial statements of listed
companies, the 2002 EU regulation gives each member state the option to require or allow the use
of IFRS for individual financial statements and/or the consolidated financial statements of unlisted
companies. Even though the French standard-setter has been involved in a convergence process of
French GAAP toward IFRS since 2000, France decided that IFRS would not be allowed for French
individual financial statements, mainly because the use of IFRS would have required significant
modifications to tax and commercial laws. In the French context, accounting has been traditionally
assigned three main implicit objectives. In the first instance, accounting is a way of proving how
transactions have been carried out. Next, it has to enable the determination of income, which is the
basis for the calculation of corporate tax and for the distribution of dividends. Finally, accounting
provides information about the financial situation of a company. Even though the PCG has been
amended several times, giving greater importance to the information objective, all three orientations
still exist. Hence, there are still many differences between French GAAP and IFRS, as shown by the
following two examples. While IFRS allows both historical cost accounting and fair value
accounting, depending on the asset type, French GAAP systematically requires historical cost
accounting. For instance, under IFRS, available-for-sale financial instruments are measured at fair

4
The IASB also translates IFRS into different languages including French. There can be differences between the
European and the IASB translation.
5
Detailed information on the European endorsement process of IFRS can be found on the European Commission
website at: http://ec.europa.eu/internal_market/accounting/legal_framework/ias_regulation_en.htm

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224 Bonnier, Demerens, Hossfeld, and Le Manh

value, whereas French GAAP would only accept a measurement at historical cost. There is also a
strong influence of tax regulation on French accounting that does not exist under IFRS. Therefore,
in order to benefit from tax advantages, capital cost allowances must be recorded in French GAAP
financial statements, whereas IFRS is independent of tax considerations.

A Rules-Based Orientation
Academics and standard-setters usually distinguish between rules-based and principles-based
(or concepts-based) accounting standards (Drever et al. 2007; Schroeder et al. 2008). For instance,
IFRS is said to be principles based while U.S. GAAP is considered much more rules based.
Although clearly classifying GAAP in one of these two categories is not always easy, as underlined
by Maines et al. (2003) and Schipper (2003), we consider French GAAP to be much more rules
based than IFRS. This position can certainly be debated, but different arguments support this rules-
based view: a low application of substance over form (SOF), very specific guidance concerning
bookkeeping, compulsory formats for financial statements, and a detailed chart of accounts.
According to Drever et al. (2007), ‘‘principles-based standards focus on the economic
substance of a transaction, engaging the professional judgment and expertise of those preparing
financial reports.’’ SOF appears to be the main characteristic of principles-based standards (Maines
et al. 2003). It is not mentioned in the PCG, which even requires some accounting treatments that
are contradictory to SOF. For instance, regardless of their substance, leases are never capitalized
because only assets that are legally owned by the firm can appear on the balance sheet, while under
IFRS finance leases are systematically capitalized. As previously mentioned, tax rules must be
applied in the PCG financial statements if the firm wants to benefit from the tax deduction, even if it
does not represent the economic reality of using the asset. Under IFRS, everything is based on
economic considerations, not on tax considerations.
The PCG also contains specific requirements about how to record transactions. For example,
the way the disposal of an asset is to be recorded is very detailed in the PCG: the accounts to be
used, gain/loss classified as exceptional, gross presentation in the income statement of the selling
price, and book value of the disposed item. In addition, the PCG contains specific compulsory
formats for financial statements. For instance, income statements must be presented by nature, and
the classification of operating, financial, and exceptional expenses/revenues is strictly specified.
Finally, the PCG imposes a very detailed chart of accounts, with a specific codification for each, to
be applied by all business entities. Hence, even though the PCG does not address many specific
accounting issues, French GAAP is more rules based than principles based in our view.

Implications of a Rules-Based Orientation for Teaching French GAAP

Obviously, the French accounting context and its rules-based orientation affected the way we
used to teach accounting, which mainly involved bookkeeping matters. Indeed, our students were
traditionally required to master the following skills at the end of the introductory course: First, they
had to be proficient in double-entry bookkeeping. This meant that they needed to know how to
record basic accounting transactions in the general ledger and the journal following the specific
rules and chart of accounts of the PCG, for example sales of goods, acquisition of assets,
depreciation of assets, or payment of accounts payable. Second, they had to be able to present the
balance sheet and the income statement according to PCG specific and detailed formats. Guided by
the contents of the PCG, we had to teach very technical matters, leaving little room for judgment.
Indeed, as already explained, French GAAP gives priority to the legal form of transactions in most
cases, implying as a consequence that many economic transactions that raise questions under IFRS
are not an issue under French GAAP. For example, as seen above, lease transactions are always
recorded in the same way that one would record a rental contract and there is no question about how

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the lease is qualified (operating or finance), as is the case under IFRS. Another example concerns
revenues: The PCG does not explicitly state specific conditions to be met for the recording of
revenues, nor does it offer any explanation about how to measure revenues. Instead, it enumerates
the different kinds of revenues and explains how to record them in the T-accounts. As a
consequence, we did not ask students to make any judgment about how to record a lease or a
specific sale transaction. In our advanced courses, like intermediate financial accounting, or
consolidated financial statements, students were asked to record more complicated transactions
(e.g., merger and acquisition accounting, share-based payments, issue of share capital), but we still
focused on technical points and placed little emphasis on the economic interpretation of the
transactions.
This technical and bookkeeping orientation has been shared by most accounting educators in
France, and the move toward IFRS since 2002 has raised issues concerning this way of teaching
accounting (Colasse 2004, 2011). Moving to principles-based IFRS obviously had consequences on
our teaching methods.

CHANGES IN STUDENT CHARACTERISTICS

Accounting professors at ESCP Europe have had to face two major changes during the last 10
years. The first was related to school strategy and the second to accounting practices (the move to
IFRS). Both changes had an impact on our student population and made academics wonder which
accounting rules to teach. Should we switch to IFRS or should we stay with French GAAP? To
answer this question we had to consider our students’ profile, their curriculum, and their future jobs.
A subsequent question also arose: should we change our pedagogical objectives for the accounting
classes?

Students’ Profile
Our students’ profile has changed. Until the last ten years or so, our students were mainly
French, coming from the very selective French system of preparatory classes. These students have
not studied accounting before entering our school. Following the merger of two business schools
(resulting in what is ESCP Europe today) with campuses in five major European cities (Paris,
London, Madrid, Berlin, Turin), the explicit strategy of the new group was to foster the
development of globalization (or Europeanization). One part of this internationalization was to
recruit more and more foreign students through our original network of campuses. Table 1 shows
that this strategy has succeeded as attested by the proportion of foreign students, which has now
increased to more than 50 percent. We sensed that with IFRS the introductory accounting course
would become more challenging for them.

Students’ Curriculum
The curriculum of the majority of our students has also become pan-European. If they wish,
students can study in three different European countries during their three-year program, with the
possibility of obtaining double or triple degrees. Consequently, developing an accounting course in
line with our students’ international track was an important issue. This pan-European curriculum
explains why more and more of our students are recruited by major international companies, which
is where the majority of them find their first job. Given this change in our students’ curriculum,
learning IFRS is more relevant for students who will later move to other countries. The proportion
of students who work outside their country of origin steadily increased from 40.27 percent in 2007
to 48.24 percent in 2010, and stood at 44.41 percent in 2011.

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TABLE 1
Geographic Origin of Our Students over the Last Ten Yearsa
Countries 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002
France 42% 34% 43% 45% 43% 45% 42% 46% 63% 59%
Rest of Europe 29% 28% 32% 29% 26% 31% 29% 27% 23% 24%
Africa 3% 5% 5% 6% 6% 6% 8% 7% 6% 6%
America 9% 9% 5% 4% 12% 5% 6% 6% 2% 3%
Asia 16% 15% 14% 13% 13% 14% 15% 14% 6% 8%
Other countries 1% 9% 1% 3% 0% 0% 0% 0% 0% 0%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

a
These data come from an internal survey for accreditation and ranking purposes. Some of these figures are available on
our website: www.escpeurope.eu

Students’ Future Jobs

As indicated in Table 2, our students mainly end up working for large firms—usually listed
ones—that use IFRS. Teaching only French GAAP would therefore be of limited value to our
students. Our teaching examples would only be taken from small and medium-sized entities that use
French GAAP. As a result, students would be unable to understand the financial statements of the
company they eventually found themselves working for.

New Pedagogical Objectives

In view of these changes in our students’ profile, their curriculum, and their future jobs, the
transition from French GAAP to IFRS had become unavoidable. There was a transition period
during which we taught mainly French GAAP, together with some comparisons to IFRS. The
complete shift to IFRS was made in September 2009. Simultaneously, we established new
pedagogical objectives:
 teach students how to predict the impact of decisions on financial statements,
 teach students how to examine financial statements and analyze key information,

TABLE 2
Size of Firms Where Our Students Have Worked in the Last Three Yearsa
Number of Employees 2011 2010 2009
More than 50,000 35.75% 32.48% 24.14%
From 5,000 to 49,999 19.20% 30.09% 23.57%
From 2,000 to 4,999 8.27% 8.55% 11.49%
Less than 1,999 36.78% 28.88% 40.80%

Total 100% 100% 100%

a
These data come from an internal survey for accreditation and ranking purposes. Some of these figures are available on
our website: www.escpeurope.eu

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A French Experience of an IFRS Transition 227

TABLE 3
Main Pedagogical Impacts on the Way the Accounting Process Is Taught
Presentation and Analysis
Transaction Identification Recording Process of Financial Statements
Learning goals Students must be able to No real changes (Students Students must be able to
define economic must be able to record identify and explain the
transactions before transactions.) impact of how the
recording them. transaction is defined on
the presentation and
analysis of financial
statements.
Learning strategy  Use of real cases No real changes (double No real changes (business
 Presentation of multiple entry, business game) game, real case studies
transactions in different including a presentation
industries by a CFO)
Assessment  Design of dedicated No real changes (business Explanations of recording
exercises based on real game, tests) impacts become explicit
cases and are emphasized.
 Assessment in final exam

 develop students’ skills related to understanding financial statements in an international

context, and
 train future international managers.
In order to achieve these objectives, we modified our teaching approach by introducing more
interpretation and cutting back on bookkeeping, as detailed in the following section. As a
consequence of this evolution, several pedagogical issues emerged.

FROM TEACHING FRENCH GAAP TO IFRS: PEDAGOGICAL ISSUES

All the accounting courses that adopted an IFRS approach faced several pedagogical issues.
The changes made to the introductory accounting course show how IFRS impacts our way of
teaching accounting and raises new pedagogical challenges.

Pedagogical Issues in the Introductory Accounting Course

The adoption of IFRS for the introductory accounting course impacts every step of the way the
accounting process is taught and the requirements of the final assessment.

Different Emphasis on the Steps of the Accounting Process

The adoption of IFRS has altered the way accounting is taught in each different step of the
accounting process. Mainly, what have been modified are learning goals, learning strategy, and
assessment. Table 3 presents these changes.
First, as principles-based accounting standards based on a conceptual framework, IFRS
requires accountants to clearly define concepts, resulting principles, and practical applications
(Barth 2008), a process that requires the use of judgment (ICAS 2006). Such an approach leads to
framework-based teaching (Hodgdon et al. 2011; Wells 2011), and economic events need to be

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228 Bonnier, Demerens, Hossfeld, and Le Manh

analyzed in much more detail to be properly recorded. We consequently reinforced the approach
where students have to define and analyze various transactions with respect to the conceptual
framework. Professors must present different case studies in order to teach the differences of
treatment when applying IFRS. Students are systematically tested on the way they define
transactions.
Second, while IFRS has not revolutionized recording techniques (with respect to French
GAAP), in some cases it does require practitioners to memorize and apply additional recording
schemes. We have maintained the same learning strategy and the same type of assessment
concerning the recording process.
Third, under both French GAAP and IFRS, recordings necessarily have an impact on the
presentation and the analysis of financial statements. When we taught French GAAP in the
introductory course, the link between recordings and financial analysis was much more implicit and
was not systematically tested. The adoption of IFRS for the introductory course has led to increased
emphasis on the presentation and analysis of financial statements.
The following example on leases illustrates how applying the changes mentioned in Table 3
has modified our teaching approach to achieve our new pedagogical objectives. Before treating
detailed transactions, we present an overview of the different parts of the IFRS conceptual
framework, including the decision usefulness approach and its underlying theories (the firm as a
nexus of contracts, agency theory, efficient market hypothesis) and, in particular, the qualitative
characteristic of faithful representation (substance over form).6 We then present a transaction in
which, for example, an entity enters into a contract where it receives an asset, pays an annual
amount to the supplier, and has to return the asset at the end of the contract. Students are required to
qualify the economic position of the entity: Did the entity acquire the asset or rent it? Who bears
substantially the risks and rewards?7 Finally, is this transaction a debt-financed acquisition with or
without transfer of legal ownership (in the latter case it is a finance lease) or is it a rental contract
(operating lease)? We then present the relevant book entries and discuss their impact on the
financial statements.8 Finally, students have to consider the consequences for the financial statement
presentation if this transaction had been structured, and therefore qualified, differently.9 We discuss
the impact of a different qualification on ratios, such as the debt-equity ratio, and use real company
information, for example from airlines, to quantify these impacts.
The accounting department had to create its own teaching material (textbook, presentations,
case studies, and exercises) because when we changed to IFRS, there were not many resources
available, especially not in French, which was and is our teaching language. We took inspiration
from different resources that are well documented in previous papers (Tyrrall and Aggestam 2011;
Larson and Street 2011). Textbooks by Alfredson et al. (2007) and Stolowy and Lebas (2006) were
mainly used to introduce the IFRS approach. The previous editions of our textbook, written by the
department’s professors (Eglem et al. 2006), focused on French GAAP, while IFRS was only
discussed in some advanced sections. In the new editions of our textbook (Eglem et al. 2010), we
now focus on IFRS. Real cases are resourced by published documentation (e.g., company reports,

6
In the French GAAP course, we would not treat underlying theories and substance over form. The legal form
prevails under French GAAP.
7
In the French GAAP course, students would not have to qualify the transaction because the accounting is based
on the legal form, which we would have to indicate to students.
8
In the French GAAP course, we had to spend more time presenting the very standardized book entries (for
example, emphasizing the detailed account numbers to be used or in which part of the income statement the
numbers are to be presented). Hence, impacts on financial statements were only briefly discussed.
9
In the French GAAP course, only the legal (not economic) structuring impacts accounting with only two
outcomes (acquisition or rent). Since it was not our task to go into the legal details and students had a separate
law class in their first year, we did not discuss different structuring impacts.

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FIGURE 1
Final Exam Grade Composition

IASB and EFRAG websites), but also by the practice-related contacts (auditors, CFOs, regulators,
etc.) of each professor and the textbooks used for other courses (Bonnier et al. 2006; Maillet and Le
Manh 2006; Hossfeld et al. 2007; Maillet and Le Manh 2010).

Different Emphasis on the Requirements in the Final Assessment

The impact of the transition to IFRS on how the accounting process is taught has necessarily
changed the way we assess the achievement of learning objectives. The definition of economic
events and the presentation and analysis of financial statements matter much more since the
transition to IFRS.
As a result, we have adjusted grading requirements (tests, case presentations, business game,
etc.) to these changes. The composition of the final exam grade illustrates this evolution in
requirements as shown in Figure 1.
Prior to the IFRS transition, bookkeeping was the main requirement of the final exam (more
than 50 percent of the final grade). When teaching French GAAP, the right accounting entries for
economic events implicitly assessed the comprehension of these events and their financial impacts.
After the transition to IFRS, bookkeeping requirements have declined (to around 30 percent of the
final grade in 2009 and 2010), giving way to the definition of economic events and the presentation
and analysis of financial statements (almost 50 percent of the final grade). Questions about the
definition of economic events and their impacts on financial statements have become much more
detailed.

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Bookkeeping tasks are still incorporated to assess knowledge of the recording process, while
the definition of economic events and the presentation and the analysis of financial statements
assess knowledge of the economic perspective of IFRS. Assessing students’ comprehension of the
link between accounting and financial issues has become much more explicit.

Teaching IFRS: Pedagogical Challenges

As laid out above in the section on French GAAP, IFRS can be considered principles based,
therefore avoiding the adverse effects of rigid accounting rules (Palepu et al. 2010). The principles-
based approach of IFRS leads to several challenges in terms of teaching: changing the learning
attitude of students, determining the appropriate degree of detail for topics studied, and adjusting
the assessment process.

From a Learning Attitude of Repeating Answers to One of Finding Answers

With IFRS, it is neither instructive nor helpful to students to teach standardized solutions to
accounting problems. Whereas the traditional accounting program at ESCP Europe was mainly
centered on the repetition of French GAAP accounting treatments, IFRS requires professors to teach
concepts and principles based on underlying theories (Barth 2008). To apply IFRS, students should be
able to make judgments based on economic, financial, and other theories. In many cases there may
not be a standard solution to problems. Therefore, students cannot expect to receive and repeat ‘‘the’’
final answer (a learning attitude hereafter referred to as the ‘‘repeat’’ mode). Instead, they have to find
it themselves based on the different underlying concepts (hereafter called the ‘‘find’’ mode). In terms
of Bloom’s taxonomy of learning objectives (Bloom 1956), even though knowledge, comprehension,
and application are still important in an IFRS environment, professors have to put more emphasis on
developing the analytical, synthesis-enabling, and evaluation skills of their students. Hence, learning
objectives have been expanded, even for an introductory accounting class. This is particularly difficult
for first-year students because they are still conditioned by the ‘‘repeat’’ mode and are unfamiliar with
the basic economic, financial, etc. concepts underlying IFRS.
As an illustration of this change, let us take a transaction where a company sells equipment to a
customer including a contractual right for the latter to return the equipment and be reimbursed a
predetermined amount. In a French GAAP accounting class, it was important to teach the
accounting entries for a sale. Given that any transaction that is legally a sale is to be recorded as
such, an analysis of the return feature (or other parts of the contract) was not necessary. In IFRS, it
is important to analyze this transaction in detail to judge whether it is a sale (condition: transfer of
significant risks and rewards to the customer). Depending on what the risks and rewards are, the
period of time during which the customer can return the equipment, the reimbursement amount,
and/or other features, this transaction may or may not be recorded as a sale (and the professor shows
the appropriate accounting entries). If not, it is necessary to discuss what the economic reality of the
transaction is (rent?) and therefore how it should be accounted for.
Another example is the measurement of tangible or intangible assets. In French GAAP, only
the historical cost model is allowed. In IFRS, companies have a choice between the cost model and
the revaluation model, the latter requiring a revaluation at fair value on a regular basis. The pros and
cons of each model are discussed including their impact on ratio analysis.

The Degree of Detail to be Taught

Of course the number of hours allotted for an introductory accounting class does not allow for
the presentation of all the concepts in detail. This leads to another challenge: what degree of detail
should professors aim for in the introductory accounting class?

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The solution lies in limiting and carefully selecting the topics treated. This limitation is now
necessary, in contrast to a traditional ‘‘Introduction to Accounting’’ class, because the ‘‘find’’ mode
where students have to analyze the underlying economics of a transaction before accounting for it
takes more time than the ‘‘repeat’’ mode where no analysis is necessary as the accounting is based
on given legal aspects only. The topics to be selected must therefore be based on easier and more
widely known concepts. Lease accounting, for example, is relatively easy because lease contracts
are compared to a debt-financed acquisition; the underlying cash flows and inherent risks and
rewards are rather simple to establish. For an intermediate I or II class, the lease examples can then
be extended to more complex transactions such as sale-and-leasebacks or lease contracts with
various difficult features (responsibility for damage, maintenance, etc.).

The Adjustment of the Assessment Process

The ‘‘find’’ mode is problematic in that it makes it far more difficult for students to study for
exams and for professors to prepare exam questions. In the traditional setting (‘‘repeat’’ mode),
students just had to memorize the standardized accounting solutions. Once they had mastered these
solutions, they could be relatively sure to pass the exam with a decent grade. With the new
approach and the absence of single solutions, studying for exams is more difficult (what are the
clear boundaries of the concepts a student should know?) and more uncertain (even with good
preparation, students cannot be sure to make a 100 percent correct judgment). Therefore, students
should be presented with ambiguous cases and have to find their own solutions. We therefore
recommend a gradual approach: start with questions and cases that are rather clear-cut, and then
introduce more and more ambiguity. To implement this approach we developed primarily our own
cases because it was easier to create cases adapted to our environment of large listed European
companies than to translate English-language cases.10 Also, at the beginning of our transition
process there were not as many case resources available as there are today, such as the IFRS
education initiative,11 material provided by iasplus.com and other websites, or French and English
textbooks (e.g., Dick and Missonier-Piera 2010; Needles and Powers 2013; Weygandt et al. 2011;
Wiecek and Young 2010).
For professors there is a dilemma. On the one hand, they are tempted to invent questions and
cases that have only one correct answer, making grading easier and avoiding grade disputes. On the
other hand, such questions do not prepare students sufficiently for judging situations that may not
be as clear-cut as an exam question and may not have just one possible solution under IFRS.
Another assessment issue is that grading and providing feedback in general is more difficult. In
the traditional French GAAP setting, standardized solutions predominated. It was therefore
relatively easy to grade exams and show students where errors were made and how to avoid them in
the future. Under IFRS, the solution is subject to an assessment of the situation and so there may not
be a single solution. Therefore, the process of arriving at a solution (or for a specific situation, the
only solution) has to be explained in detail, including the grading. The professor may have to accept
different solutions given that the reasoning behind them is correct and must also fully explain why a
certain answer does not get full credit.
For the above examples on revenue recognition and lease accounting, we would consider an
answer wrong in terms of grading if students proposed to account for the legal form of the
transactions (e.g., ‘‘this sales/leasing transaction is a sale/rental because it is legally a sale/rental’’).
On the other hand, we would accept different answers as correct if they were based on the
application of a principles-based approach. Putting more emphasis on different features of the

10
As already mentioned, all of our classes were and are taught in French.
11
http://www.ifrs.org/Useþaroundþtheþworld/Education/Education.htm

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Volume 28, No. 2, 2013
232 Bonnier, Demerens, Hossfeld, and Le Manh

transaction (some of which may not even be mentioned in the question but simply assumed by the
students) and therefore inferring (or not) a substantial transfer of risks and rewards, it may be
correct to classify a transaction as a sale/finance lease.
Given the multiple changes and challenges involved in the switch from one GAAP to another,
we found that the key to success lies in the strong involvement of all the academic team members.

CONCLUSION
This paper shows, through our personal experience, how difficult it was to integrate a new set
of accounting standards into a business school curriculum. We have learned a few lessons.
The first lesson is that the amount of difficulty that academics must face when they change
from one GAAP to IFRS is closely linked to the characteristics of the original GAAP they were
teaching. We realized that our teaching methods were largely influenced by accounting standards.
Moving from local rules-based to principles-based standards (IFRS) raised different pedagogical
issues. We had to find the right level of detail in the application of IFRS for an introductory course
to encourage students to analyze economic events in greater depth and to adjust our assessment
process.
The second lesson is to consider these accounting standard changes as an opportunity to enrich
our discipline. We took the time to thoroughly revise our teaching objectives. The lack of financial
resources devoted to this project was not really an obstacle; instead it provided an incentive to
increase academic communication. During the transition period, professors held regular meetings to
write a new course textbook based on IFRS. This helped accounting professors to update their
knowledge and to improve their class presentations and case studies, which stimulated exchanges
leading to better pedagogy. Although business school professors have tried in the past to enrich the
unavoidable bookkeeping with material on accounting principles, they were nevertheless partly
influenced by intrinsic French accounting objectives. In reality, IFRS was a perfect pretext to
achieve a real transition to financial reporting.
The third lesson is that students are always more open to changes than we professors think. We
have been pleasantly surprised by their reactions: they become accustomed to these radical
transformations very rapidly. This successful shift has been confirmed by the favorable student
evaluations of the accounting course. Compared to other courses offered in the first semester, this
course has always been at the top of the students’ satisfaction rankings. This high score has always
been attributed to the reassurance provided by a technical approach and therefore it could have
collapsed with the pedagogical change imposed by IFRS. When we compared student course
evaluations before (2008) and after (2009) teaching IFRS, we observed the opposite effect. The
number of very satisfied students increased from 37.47 percent in 2008 to 45.04 percent in 2009,
whereas the proportion of dissatisfied students dropped from 13.21 percent in 2008 to 11.05 percent
in 2009.12 We attribute the improved numbers to the changes induced by switching to IFRS,
because for these two years the teaching team was exactly the same and the IFRS textbook we
wrote with our accounting colleagues (Eglem 2010) had not yet been published. These very
encouraging results demonstrate that students enjoy the challenges of the new analysis and
synthesis approach.
We felt that we were making things move in the right direction. But at the same time, we are
conscious that we still have to make progress to fully achieve our pedagogical objectives. To
improve student skills in understanding and using financial statements, we should design more case
studies with open solutions. We also must strongly encourage students to participate more in their
own learning process, which requires strengthening the educator’s role as a facilitator. IFRS leads

12
More detailed data are available upon request from Professor Hossfeld (chossfeld@escpeurope.eu).

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A French Experience of an IFRS Transition 233

educators to move gradually from a teacher-centered/content-oriented conception of teaching to a

student-centered/learning-oriented one (Kember 1997).
Although there is still room for improvement, we do provide our students with an accounting
education that enables them to work in any international environment.

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