Accounting law encompasses all the regulations applicable to the accounting that a company must adhere to.

One of the main actors in accounting standardization in France is the Autorité des normes comptables (ANC).

Among the sources of accounting law are:

– Legislative sources: Articles L 123-12 to L 123-28 of the Commercial Code

– Regulatory sources (decrees and orders)

– Accounting jurisprudence: Accounting jurisprudence is quite rare. It consists of decisions made by courts ruling on an accounting rule.

– Accounting doctrine: Recommendations from the Order of Chartered Accountants, standards and opinions from the National Company of Statutory Auditors, recommendations from the Financial Markets Authority, etc.

The accounting obligations of the company vary depending on the nature of the activity and its turnover.

Regarding commercial activities, Article L 123-12 of the Commercial Code provides:

“Any natural person or legal entity with the status of a merchant must carry out the accounting registration of movements affecting the assets of their company. These movements are recorded chronologically.”

They must conduct an inventory check, at least once every twelve months, of the existence and value of the active and passive elements of the company’s assets.

They must prepare annual accounts at the end of the fiscal year based on the accounting records and the inventory. These annual accounts include the balance sheet, the income statement, and an annex, which form an inseparable whole.“

Additionally, the company will have increased accounting obligations based on the importance of its turnover.

Three regimes are distinguished:

Micro-enterprise regime. This regime applies to individual entrepreneurs not liable for VAT. Companies under this regime are not required to establish annual accounts and only maintain a record chronologically noting the amount and origin of their professional revenue.

Simplified regime. These companies must keep accounts including a balance sheet and an income statement (without an annex).

Normal regime. Companies under the normal regime must chronologically record the accounting movements affecting the company’s assets, conduct an inventory check at least once a year for the existence and value of assets and liabilities, and prepare annual accounts at the end of the fiscal year, including the balance sheet, income statement, and annex.

Note that large companies or those listed on the stock exchange are subject to increased accounting obligations. Special rules also exist for certain professions, especially non-commercial professions (lawyer, doctor, etc.).

The taxation of the company is based on its accounting. Indeed, the taxable income of the company is constituted by the accounting result to which a certain number of extra-accounting tax adjustments will be applied. These adjustments are made outside the accounting on a special tax form “Determination of taxable income”.

There is, therefore, an interdependence between accounting and taxation. If there are errors in the accounting result, the same will apply to the tax result.

Tax adjustments are necessary due to the gap between accounting law and tax law on the determination of taxable income.

Accounting regulations and obligations on companies are becoming increasingly burdensome each year.

Regardless of the business activity, proper compliance with accounting obligations is fundamental both for internal management and in the eyes of external investors, as well as in relation to tax authorities.

Indeed, tax authorities and jurisdictions are becoming stricter regarding the tax consequences that may arise from poor accounting practices and non-compliance with the company’s accounting obligations:

– Automatic taxation in case of a lack of probative value in the accounting

– Fictitious company and challenge to tax schemes

– Non-deductibility of certain expenses and inability to carry forward losses…

Therefore, accounting law becomes a key element in the tax strategy for the company, as compliance with accounting obligations becomes essential for the proper fiscal management of the company.

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