Any entity filing annual financial statements must comply with a number of accounting obligations, most of which are defined in the French General Chart of Accounts (Plan Comptable Général - PCG ).
The financial statements must reflect a true and fair view of the company's performance, and must therefore be presented in a clear, honest and rigorous manner.
Regular bookkeeping and auditing by a statutory auditor (in certain cases) certify that management decisions have been properly reflected in the company's accounts.
Let's take a look at the accounting requirements for a SAS.
A SAS must maintain 2 books of account
The "journal book" summarizes all transactions directly concerning the company's assets.
Entries are made throughout the year and presented according to the standards imposed by the French General Chart of Accounts (PCG).
Next comes the "general ledger", which lists all the accounting entries recorded in the daybook, broken down according to the PCG standards applied by the company.
Each revenue received or cost spent is allocated to an expense item.
An SAS must produce an annual balance sheet, an income statement and a legal appendix.
The balance sheet at a given date is a statement of the company's assets and liabilities.
It enables third parties to assess the company's sustainability, its ability to repay its debts and its results for the year.
The balance sheet is a table divided into two parts. The left-hand section, called assets, represents the total assets.
The right-hand side, called liabilities, comprises all financing resources.
The income statement reflects the company's activity over a 12-month period.
It explains the formation of profit or loss for the year by summarizing the income for the year (called income), a source of enrichment, and the costs (called expenses), a source of impoverishment.
It enables third parties to assess the company's profitability. The table is divided into two parts.
The left-hand side shows expenses, or all consumption for the year, or the uses made of the activity.
The right-hand side shows the income or resources generated by the company's activities during the year.
Finally, the legal appendix is an accounting statement
This includes significant information, the purpose of which is to explain the contents of the balance sheet and income statement.
It must contribute to compliance with the principles of true and fair view, comparability and business continuity imposed by the chart of accounts.
But above all, it must illustrate the correct application of the principle of prudence, which is essential to maintain the confidence of all stakeholders.
Certain situations require the appointment of a statutory auditor to certify a company's financial statements .
Its purpose is to ensure that the company's management decisions are properly reflected in its accounts. It is in no way intended as proof that the accounts have been properly kept, or as a forecast of the company's future results.
The statutory auditors base their work on historical data, not forecasts.
An SAS is obliged to appoint a statutory auditor if, at the end of a financial year, it exceeds at least two of the following three thresholds:
- Balance sheet total exceeds 4 million euros
- Pre-tax sales in excess of €8 million
- It has more than 50 employees.
The statutory auditor is appointed as from the following financial year.
If the SAS is controlled by one or more other companies, then the appointment of a statutory auditor is a de facto obligation. The appointment of a statutory auditor takes effect as from the financial year in which this situation arises.
Note: These thresholds have been updated to take into account the adoption of the PACTE law in April 2019, which provides for alignment with European accounting directives.
Lastly, in the absence of any obligation, associates may decide to appoint a statutory auditor if they so wish.
Compliance with all the rules laid down by the tax authorities and the general chart of accounts is imperative, on pain of being subject totax reassessment, or even far more serious criminal proceedings.
Written by our expert Paul LASBARRERES-CANDAU
September 17, 2018
