On 26 December 2023, the French Minister of Economy approved the ANC regulation 2022-06 (ANC : Autorité des Normes Comptables – national accounting standards body) on the general chart of accounts. It will be mandatory for financial years beginning on or after 1 January 2025.
Our firm will be happy to help you assess the impact of this update to the French general chart of accounts, particularly on the presentation of the annual financial statements and the transactions to be recorded as extraordinary results.
Why do we need to consider the impact of this new regulation in 2024?
Although the main consequences will be effective in 2025, contracts entered into by the company could be influenced by these new regulations. If the analysis is not carried out in 2024, the contracts in question could produce undesirable effects in 2025. In some cases, contracts will have to be renegotiated before the end of 2024.
In practice, the concerned contracts are those that refer to financial aggregates such as added value, gross operating surplus, EBITDA (earnings before interest, tax, depreciation and amortisation) and operating profit. While the new general chart of accounts does not affect the calculation of net profit, the breakdown of net profit between operating profit and exceptional result may be different in the future.
For example, a transport company that used to make capital gains on the resale of used trucks will find these gains in operating result, whereas until now they could be presented as exceptional result.
It is up to each company to examine its contracts to identify those that could be influenced.
This applies in particular to contracts entered into with employees, either individually or collectively. For example, salary bonuses based on the company’s operating profit or that of a branch of the company’s activity, or collective profit-sharing contracts that refer to added value or EBITDA.
This could also apply to financing agreements containing early repayment or interest rate increase clauses based on EBITDA criteria. Such clauses may be included in the additional duties toward the bank covenants.
How should you react?
If the purpose for which the contracts were signed no longer corresponds to the new regulations, the contracts will have to be renegotiated with the co-contractors, such as employees or financial partners.
These negotiations can sometimes take a long time and it therefore seems necessary to review the contracts concerned between now and the summer of 2024 to enable renegotiations to take place in the 2nd half of 2024.
Otherwise, a contract applicable at the beginning of 2025 will produce its effects for all or part of 2025 without the company being able to terminate it.
