Welcome to Part 2 of our blog series on draft bill 8286. In Part 1 we gave you the lowdown on the bottom-up structure of this one-stop law as well as essential information about micro undertakings and large undertakings. And that’s not all, so don’t forget to check it out!
With seven more significant changes on the horizon – and a few others worth mentioning too – we’ve got the answers to the key questions everyone’s asking.
1. Duration of financial accounting period
Q: What should the duration of a financial accounting period be?
A: This question has always been open to interpretation, and it’s finally been answered. The draft bill proposes that standalone annual financial statements have a duration of 12 months. By derogation, a financial accounting period can have a minimum of 52 weeks and a maximum of 53 weeks.
In the year of incorporation, the first financial period can have a duration of less than 12 months, but cannot exceed 18 months.
In any other exceptional circumstances where an undertaking changes its financial accounting period, the financial period in the year of transition shall remain less than one year.
A major overhaul in the draft bill relates to Sociétés en Commandite Spéciale (SCSps), the famous legal form introduced in 2013 in the amended law of 10 August 1915 on commercial companies. As of now, unregulated SCSps have an obligation to prepare financial data but are not required to file or publish any of their financial information.
Q: What will change and should the draft bill be voted in its current form?
A: Unregulated SCSps will have to submit their trial balance annually (via the eCDF platform) using the Luxembourg Standard Chart of Accounts (SCA)/Plan Comptable Normalisé (PCN). Certain SCSps, such as RAIFs, undertakings regulated by the CSSF and the CAA, as well as undertakings preparing financial statements in accordance with IFRSs, will be exempt from the obligation to submit the SCA/PCN as they are required to file financial statements in accordance with this draft bill.
It is important to highlight that SCA/PCN are not published and are not available for public consultation. Only government bodies including STATEC, the Administration des Contributions Directes (Luxembourg Inland Revenue), the Administration de l’enregistrement, des domaines et de la TVA will have access to the SCA/PCN of these SCSps.
3. Dissolved or in-liquidation undertakings
The draft bill sheds light on the reporting requirements for dissolved or in-liquidation undertakings. Until now, the requirements for such undertakings were limited, fragmented and outdated.
Q: What does the draft bill propose?
A: A new article explains that an undertaking which is not able to continue its activities or does not have the intention to carry on its activities, should adapt its accounting principles, measurement bases and valuation methods to reflect the non-going concern basis of preparation. This will also apply to dissolved or in-liquidation undertakings.
What’s more, article 1100-14 of the amended law of 10 August 1915 on commercial companies is being amended and will require the presentation of the liquidation results in the form of interim standalone annual financial statements to the annual general meeting of an undertaking, within six months of the financial year end or one calendar year after the opening of liquidation. These interim annual financial statements of liquidation will include a balance sheet, a profit and loss account, and notes accompanying the liquidator(s)’ report explaining the progress of liquidation and the reasons why the liquidation was not completed. These interim annual financial statements of liquidation are to be published at the RCS if the undertaking in liquidation is an undertaking with a legal form that is required to publish its standalone annual financial statements.
Once the liquidation is complete, the liquidator(s) must submit a report to the annual general meeting. This report must include closing liquidation financial statements consisting of a balance sheet, a profit and loss account as well as notes covering the period from start to close of the liquidation. At this point, the annual general meeting will nominate one or more ‘commissaire(s) à la liquidation’ to examine the documents prepared by the liquidator(s). The closing liquidation financial statements are to be published with the RCS.
4. Intangible assets including goodwill with unlimited useful lives
In exceptional situations, intangible assets including goodwill, may have unlimited useful lives. Instead of amortizing such intangible assets annually, the undertaking will have to test for annual impairment.
Q: What will undertakings have to do?
A: Undertakings will need to identify which intangible assets have unlimited useful lives and test these for annual impairment in accordance with IAS 36 Impairment of assets, or in line with the accounting framework of another EU member state. The law addresses a point where even Directive 2013/34/EU does not differentiate between assets with unlimited useful lives and assets that have useful lives that cannot be reasonably determined, meaning their maximum useful lives cannot exceed ten years.