The accounting reform continues: the law of July 30th 2013 (the “New Law”) reorganises the Commission for Accounting Standards (Commission des Normes Comptables - CNC) and modifies certain statutory provisions on annual accounts and consolidated accounts.
Three goals have been pursued by this New Law:
- With a view to give it sound human and financial resources and more operational autonomy necessary for an optimised functioning, the Commission for Accounting Standards is now organised under the form of an economic interest group (groupement d’intérêt économique – GIE) with legal personality and power to levy an administrative tax (for an amount not exceeding EUR 10.00) on filings of annual and consolidated accounts.
- Since the end of 2010, Luxembourg undertakings may choose between the international financial reporting standards (IFRS) and the rules for valuation at fair value (as introduced under Section 7bis of the law of December 19th 2002, on (...) the accounting records and annual accounts of undertakings – the “2002 Law”). However neither the 2002 Law nor the amended law on commercial companies dated August 15th 1915, (the “1915 Law”) set clear guidelines for the determination of distributable reserves in case of fair value measurement.
That is why the New Law has opted for the accounting restatement method (méthode du retraitement comptable) rather than the double-entry book-keeping by clarifying the use of unrealised gains created by revaluation of assets at fair value (whether by application of IFRS or Lux GAAP). The new article 72ter of the 2002 Law provides for the deduction of unrealised positions from the accounting reserves to limit the amount of distributable reserves to the sole profits actually realised. Hence any unrealised position (with 2 exceptions as described under article 72ter (3)) shall be excluded from dividend distributions and booked as an un-distributable reserve.
There is no criminal sanction, but the claw-back provisions of article 72-4 of the 1915 Law have been extended so as to cover any violation of the new statutory limitations of article 72ter of the 2002 Law, in case the shareholders were aware of or could not reasonably ignore its irregular character.
- Other provisions regulating the annual and consolidated accounts have been amended in order to complete and/or clarify their scope, for instance:
- the application of the principle of substance under the last paragraph of article 29 of the 2002 Law becomes optional;
- the concept of differed tax liabilities is confirmed under article 65 (1) – 11° of the 2002 Law;
- the liability of the members of the administrative, management and supervisory bodies of the undertakings subject to the obligations to draw up and publish the annual accounts, annual management report and/or corporate governance statement is specified under article 69ter of the 2002 Law;
- further simplifications and exemptions as regards the publication obligations are made available to certain undertakings under article 79 of the 2002 Law;
- the exemption from the obligation to draw up consolidated accounts for Luxembourg sub-groups covered by consolidated accounts of undertakings not governed by the law of a Member State shall be prohibited pursuant to article 316 of the 1915 Law just as it is already the case for Luxembourg sub-groups covered by consolidated accounts of undertakings residing in a Member State.
Finally, the process of centralisation of financial data via the eCDF platform has required a couple of additional modifications: articles 28 and 29 of the 2002 Law do no longer allow for certain changes in the presentation of the balance sheet and profit and loss accounts.
This restriction is however not applicable to the consolidated accounts (not subject to the standardised electronic gathering), which may now also take the form of any layout provided for by the Fourth Council Directive 78/660/EEC of July 25th 1978, on the annual accounts of certain types of companies (as amended) when prepared under Lux GAAP.
Published on October 2nd 2013, all provisions of the New Law are effective since last week unless otherwise decided by undertakings for their running financial year and except for the changed layouts for the balance sheet and the profit and loss account (which may not yet apply to any financial year starting in 2013).