Q&A CNC 22/028 concernant la mise en œuvre de l’exemption de consolidation petits groupes (article 1711-4 LSC)

On 10 February 2023, the Commission de Surveillance du Secteur Financier (CSSF) issued a press release, informing about the previous publication in December 2022 of a FAQ by the Commission des Normes Comptables (CNC) entitled „Q&A CNC 22/028 regarding the implementation of the consolidation exemption for small groups (Article 1711-4 LSC)“, specifying the Company Law (Loi concernant les sociétés commerciales – LSC), with the objective to present the practical arrangements for easier implementation of the small group exemption.
Indeed, Article 1711-4, Paragraph 1 of the LSC concerning commercial companies provides all companies which should be consolidated are exempted from the obligation to draw up accounts statements and a consolidated management report of any parent company when, on the closing date of their respective balance sheet, do not exceed, on the basis of their latest annual accounts, at least two of the following three criteria:
– balance sheet total: €20 million;
– net turnover: €40 million;
– number of staff employed full-time and on average during the financial year: 250.
The purpose of the present Q&A CNC 22/028 is to provide an accounting doctrine concerning the practical terms of the exemption from consolidation, as provided for in Article 1711-4, Paragraph 1 of the LSC concerning companies businesses – usually referred to as the “small group exemption”. It should be noted in particular that the CNC has concluded that the consolidation exemption applicable to a small group is not available for bank holding companies which are subject to prudential supervision on a consolidated basis by the CSSF, and which made the choice to draw up their consolidated accounts in accordance with Title XVII of the LSC concerning commercial companies (point 5.2 of the FAQ on page 7).
The practical implementation of this binding exemption – usually referred to as the „small exemption” group“ – brings up several questions. Among the recurring questions is, in particular, whether the parent company must consolidate in order to determine whether it can validly invoke the „small group exemption“ or whether there are practical arrangements to avoid a consolidation exercise in good and due form.
The questions of Q&A CNC 22/028 (for now only available in French) are as follows:
1. Do the quantified thresholds for balance sheet total and net turnover apply to the consolidated balance sheet and the consolidated profit and loss account?
2. Practical arrangements allowing easier implementation of the “small group exemption” (article 1711-4 LSC) available?
2.1. What are the practical modalities provided by the legislator? 2.2. What to do in the presence of subsidiary companies whose closing date is postponed?
2.3. Case of a company whose exercise is for a period of less than 12 months
3. How to implement the simplifications referred to in article 1711-4 LSC?
3.1. What are the quantified threshold amounts to be taken into consideration?
3.2. What companies should be considered for aggregation of accounts? 3.3. How to combine accounts and how does this differ from consolidation?
3.4. What about the criterion of staff employed full-time and on average?
3.5. Does the criterion of repetition of two consecutive years apply?
4. What are the impacts related to changes in the scope of consolidation?
4.1. Case of a subsidiary acquired during the financial year and held at the end of the year
4.2. Case of a subsidiary sold during the financial year and not owned at the closing date
4.3. Case where a parent company has sold all of its subsidiaries before the end of the financial year
4.4. Case where a parent company has sold all of its operating subsidiaries
5. Which companies are excluded from benefiting from the “small group exemption”?
5.1. Is the “small group exemption” available in the presence of a listed company?
5.2. Is the “small group exemption” available for bank or insurance holding companies?