Handbook for the preparation of annual ... - PwC Luxembourg

1 Handbook for the preparation of annual accounts under the Lu xembourg accounting undertakings falling under the scope of the law of 19 December 2002 November 2014B PwC LuxembourgThis publication is exclusively designed for the general information of readers. While every effort has been made to provide accurate and timely information, information contained in this publication may not be comprehensive, or some information may have been omitted that may be relevant to a particular reader. This publication is not intended as a study of all aspects of the preparation of annual accounts for commercial companies in Luxembourg , or as a substitute for reading the related laws in force when dealing with specific issues.

2 Consequently, PwC does not guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. You must be aware that the information to which you have access is provided as is without any express or implied guarantee by PwC. Handbook for the preparation of annual accounts under Luxembourg accounting framework 1 Table of ContentsPreface 2 Introduction 3 General accounting principles 6 annual accounts 11 Balance sheet 14 Profit and loss account 20 Notes to the annual accounts 23 Management report 60 Audit of the annual accounts

3 63 Filing and publication of the annual accounts 64 Consolidated accounts 66 List of the main references to the Law 69 Appendices 75 Appendix 1: 2014 eCDF Standards forms 76 Detailed balance sheet and profit and loss account 76 Abridged balance sheet and profit and loss account 85 Balance sheet and profit and loss account for 90 Appendix 2: Standard Chart of Accounts 93 Appendix 3: Possible layouts for consolidated balance sheet and profit and loss account 122 Appendix 4: Template of management report 127 Appendix 5: Practical aspects of the filing process 130 Appendix 6: CNC Recommendations 132 Recommendation 1-1: Concept of financial holding companies 133 Recommendation 2-1.

4 Interpretation of Article 317 (3) c) of the commercial company law of 10 August 1915 in the specific case of venture capital/private equity investment companies 135 CNC general opinion 01/2014: Concept of floating financial year 137 CNC general opinion 02/2014: Concept of investment company 143 PwC Luxembourg contacts 1462 PwC LuxembourgPrefaceTwo years after a major modernisation of the Accounting1 and Commercial2 laws, the legislator has clarified and modified some provisions that were open to interpretation or potential misuse.

5 Since the Luxembourg government transposed on 10 December 2010 the European Directives known as the Fair Value Directive3, the Modernisation Directive4 and the Transparency Directive5 into Luxembourg legislation without providing any additional definition or guidance, practitioners had difficulty interpreting some concepts ( substance over form), whereas some aspects were seen as contrary to the prudence principle ( the possibility to distribute unrealised gains). As well as reforming the Luxembourg accounting body (the CNC ) and improving the consistency of some legal dispositions, the new law dated 30 July 2013 (hereafter the New Law ) amends the accounting and Commercial laws to clarify their interpretation, to ease the preparation of annual accounts, and to align the distribution provisions with the prudence Law of 19 December 2002 on the register of commerce and companies and the accounting and annual accounts of Law of 10 August 1915 on commercial companies: Section XVI - Consolidated accounts.

6 3 Directive 2001/65/EC of the European Parliament and of the Council of 27 September 2001 amending Directives 78/660/EEC, 83/349/EEC and 86/635/EEC as regards the valuation rules for the annual and consolidated accounts of certain types of companies as well as of banks and other financial Directive 2003/51/EC of the European Parliament and of the Council of 18 June 2003 amending Directives 78/660/EEC, 83/349/EEC, 86/635/EEC and 91/674/EEC on the annual and consolidated accounts of certain types of companies, banks and other financial institutions and insurance Directive 2006/46/EC of the European Parliament and of the Council of 14 June 2006 amending Council Directives 78/660/EEC on the annual accounts of certain types of companies, 83/349/EEC on consolidated accounts, 86/635/EEC on the annual accounts and consolidated accounts of banks and other financial institutions and 91/674/EEC on the annual accounts and consolidated accounts of insurance with the current modifications.

7 Recent previous regulatory changes such as the implementation of the Standard Chart of Accounts (the SCA )6 and electronic filing are progressively shaping the accounting Standards environment in purpose of this third edition is to provide an updated version of our publication Handbook for the preparation of annual accounts under the Luxembourg accounting framework . This should help preparers of annual accounts, and provide guidance on the various possible valuation policy options that are now available. These include the modifications and clarifications introduced by the legislator in this New this brochure has been prepared to cover the most common cases, it does not purport to cover all possible your company s annual accounts are prepared in accordance with International Financial Reporting Standards ( IFRS ), please refer to our illustrative financial statements publications, which are available on our website: These publications provide specific IFRS illustrative accounts for various types of business ( real estate, investment companies).

8 If you are interested in a comparison between Luxembourg accounting principles and IFRS, we also suggest that you read our latest brochure Similarities and differences A comparison of IFRS and Luxembourg GAAP , which is also available on our website. We hope you will find this Handbook helpful during the preparation of your annual accounts, and we remain at your disposal to provide support whatever your needs might Preud homme Alexandre LeleuxPartner Director6 Refer to the Grand Ducal Regulation of 10 June 2009. Please also refer to our brochure The Standard Chart of Accounts: a useful tool for both Luxembourg and for its business undertakings , Ed.

9 Kluwer. Handbook for the preparation of annual accounts under Luxembourg accounting framework 3 IntroductionThe main legal reference in this publication is the law of 19 December 2002, governing the register of commerce and companies and the accounting and annual accounts of undertakings (hereafter the accounting Law or the Law ). This publication mainly focuses on Title II1 of this with the law of 10 December 2010, the new law of 30 July 2013 amends both the accounting law of 19 December 2002 and section XVI of the commercial law of 10 August 1915 (hereafter the Commercial Law ) on consolidated annual accordance with article 24 (amending the Commercial Code ) and article 25, Title II1 of the Law applies to the following undertakings.

10 Public limited companies (soci t s anonymes), partnerships limited by shares (soci t s en commandite par actions), private limited liability companies (soci t s responsabilit limit e), cooperative companies (soci t s coop ratives), economic interest groupings (groupements d int r t conomique), European economic interest groupings (groupements europ ens d int r t conomique), and limited partnerships (soci t s en commandite simple), general partnerships (soci t s en nom collectif) and individual business owners whose annual turnover exceeds EUR 100,000 (exclusive of VAT). Only a few provisions of Title II apply to credit institutions, insurance and reinsurance companies and pension savings associations with variable capital (SEPCAVs) (for example on the filing and publication of annual accounts).