Depreciation: concepts and practices in France and the UK

This article is a comparative review of current depreciation practices in France and the United Kingdom. It starts with a consideration of the evolution of depreciation from the nineteenth century, when it was generally regarded as an optional item, often associated with profit-smoothing, through to the present day when the principle of its systematic application is never questioned. The article reviews the different regulatory frameworks controlling depreciation in France and the UK and notes the importance in France of the link with allowable expenses for tax purposes. From this analysis is drawn a series of recognition and measurement differences where the approach to depreciation is different between the two countries. Major differences are the use of residual values in the UK and their absence in France, the use of different asset categories, and different definitions for some assets. The paper then provides the results of empirical work where samples of accounts drawn from specific industry sectors are examined for evidence of actual practice. The paper concludes in observing that the research demonstrates many of the classical problems of cross-border analysis in that even a topic thought of as routine, such as depreciation, shows national differences of approach both as to asset categorization, and measurement of depreciation, so that direct comparisons are not entirely justified.