Managedepreciation of equityrepresents a concrete issue for any financial management or accountant seeking to remain in line with the annual closure. Between the justifications to be provided, the sometimes blurred boundary between accounting and taxation, and the peculiarities of the capital gains regime, assessing and then providing for latent losses requires anticipation and precision. It is regularly found that a poor estimate exposes to risks in the event of control or in future resale. Qualifying, assessing and accounting forwrite-downtaking account of the type of security and its tax treatment therefore becomes an essential competence to ensure the reliability of accounts and to secure the company legally.
Depreciation of equity – the key rule to know
In concrete terms, the depreciation of an equity must be recorded as soon as its inventory value is significantly lower than its acquisition price. At the end of the financial year, an estimated20 000 €when it was purchased60 000 €implies a provision up to40 000 €. This is required by accounting standards, but its tax impact differs according to the securities regime (especially for the long-term capital gains regime).
Finally, the depreciation of equity securities follows the principle of prudence: it occurs at the close, and must be seriously documented to attest to the compliance of the accounts. Sometimes additional vigilance is required on the tax side, as the provision may be neutralised or integrated differently depending on the category of title.
Why quickly spot depreciation?
At each closing, many DAFs or accountants ask, "Do I have to provide?" Neglecting this point or making a mistake can lead to serious consequences, particularly when controlling or transferring. The situations of latent impairment or lasting loss of value are not anodized – they require provision, sometimes rigorous documentation of the method of calculation. Some professionals suggest that tax auditors focus on this type of provision and require very concrete justifications. Sometimes a lasting loss is contested if the argument lacks logic.
Here are some key points:
- ✅ On the accounting side, depreciation is imposed as soon as the loss of value is presumed to be durable (principle of prudence, PCG art. 321-1).
- ✅ Depending on the applicable tax regime, the provision may or may not be deducted, which explains the vigilance around long-term capital gains or real estate companies.
- ✅ For a concrete situation: purchased securities60 000 €and assessed20 000 €at the closure require a provision of40 000 €.
Definition of participation securities
In order to deal well with depreciation, it is best first to clarify what is included in the concept of equity – securities representing a lasting fraction of a company, allowing to influence its choices or control (account 261 in the chart of accounts).
Equity securities are distinguished from other categories (investment securities, SCI shares, etc.) by their finality: they are used to participate in governance or to influence policy, and they are generally recorded in the accounts in the long term. It is relatively common for companies to confuse this classification, particularly in the case of rapid acquisitions.
Legal context and scope of securities
The legal definition is based on the General Tax Code (CGI, arts. 39 and 209), the General Chart of Accounts (PCG), and BOFiP instructions. For correct treatment, the following criteria should be checked:
- ✅ Duration of detentionand intent to influence or control
- ✅ Type of title: listed or unlisted, real estate companies, holding companies, etc.
- ✅ Tax thresholds(e.g. threshold of22 800 000 €for certain schemes)
Last point to note: not all 261 securities have the same tax or accounting treatment – it is therefore necessary to avoid any confusion during the initial classification. Errors at this level sometimes cause costly adjustments.
Depreciation finding: methods and thresholds
To assess depreciation is to compare the original value with the inventory value. But what method should we adopt?
It is often recommended that provision be made if the estimated "utility value" at the fence remains under the purchase cost. This useful value can be derived from a financial or accounting approach: some firms rely on separate methods depending on the complexity of the files.
Assessment methods in practice
Many professionals use net accounting assets, adjusted net assets or financial methods (update of future flows). The main methods used are:
- ✅ Net accounting assets are the net equity position of the target company.
- ✅ Adjusted net assets involve reprocessing to take into account fair value or latent earnings.
- ✅ The financial method is based on the update of flows and the analysis of foreseeable profitability.
This is regularly noted: for a company whose securities have been acquired60 000 €with an estimated net value at the close of20 000 €the required provision is fixed at40 000 €.
Why is the inventory value not always obvious?
The inventory value may be complex to determine, especially when managing unlisted securities or companies with a strong real estate component, or even holding companies. To be reliable in accounting writing, it is best to gather solid evidence: balance sheet, annual report, contract of assignment or independent expertise. In some cases, a simple certificate is not sufficient; An accountant suggested that it is not uncommon to have to multiply sources to convince an auditor.
Accounting scheme: step by step
The depreciation of the equity securities is illustrated by an endowment writing at the close and then a resumption if the value goes back or at the disposal. The accounts used are the68662(attribution to the provision) and the2961(provision for depreciation of equity securities). Sometimes a company experiences difficulties in following these movements without a clear procedure some firms offer writing models to avoid ambiguity.
Typical example of writing
Imagine a company that needs to provide40 000 €on securities acquired60 000 €. Closing writing will be as follows:
- ✅ Flow:68662 "Assessments to provisions for depreciation of equity securities"40 000 €
- ✅ Credit:2961 "Provision for depreciation of equity securities"40 000 €
On recovery (if the value of the security goes back to45 000 €the following year), the provision will have to be released to the level of5 000 € :
- ✅ Flow: 2961 5 000 €
- ✅ Credit:78662 "Company on provisions for depreciation of equity securities"5 000 €
Regularly, the software tools or templates to download facilitate time tracking (see Pennylane table or simulator, Trustpilot note4,5/5).
Tax system and deductibility
Providing accounting does not automatically mean benefiting from a tax deduction. Taxation distinguishes securities under the long-term capital gains regime (LTPP) and others, which sometimes radically changes the impact on tax. Some tax practitioners report that tax neutralisation can be surprising, especially in small structures that discover the rule during control.
Tax treatment: neutralization and implications
The provision on equity in the PVLT plan is generally reinstated taxably: it is not deductible, with some exceptions (including some real estate companies). It is also crucial to keep in mind the following:
- ✅ The allocation must be extra-accounted for and neutralized when calculating the IS.
- ✅ In the event of a resumption, a share of costs and expenses of12 %may apply to the gross surplus value of the disposal.
- ✅ For some companies with a preponderance of real estate, pay attention to the threshold of22 800 000 €.
Another point: when a company provides40 000 €on equity securities, this amount must be reinstated to the taxable income (neutral impact on the IS), unless the security is outside the PVLT regime.
It is often found that fiscal subtlety is a source of error: a manager sometimes imagines that a provision is automatically deducted, whereas the opposite is true. A trainer recently mentioned the need to master BOFiP and CGI rules (art. 209, art. 39). Is it really that complex? In some cases, yes, especially if several different titles coexist.
Special cases and exceptions
Certain securities or companies are subject to a derogation: this is the case for companies with a preponderance of real estate, SNC, SAS, GIE or unlisted securities. Treatment differs significantly, and it is better not to revert to traditional accounting practices.
Real estate companies and tax thresholds
Securities of real estate companies may benefit from tax derogations, making the provision deductible under specific conditions:
- ✅ If the company holds more than50 %the provision is generally deductible (see BOFiP, threshold of22 800 000 €)
- ✅ For CNS, SAS and GIE, it is better to check the status and regime before any operation
- ✅ Always have comprehensive documentation for tax administration: balance sheets, expertise, contracts
In a typical case: a company M holds securities F below the legal threshold, provides300 €a year, then200 €The following year. The deduction must be monitored over several fiscal years and reinstated in the event of a resumption or transfer. Some users report that it is frequently requested by the administration that precise time-series monitoring be carried out over several years to validate the deduction.
FAQ, practical cases and downloadable resources
Each year, recurring issues arise at the closing. Below are the main points to watch and a concrete example to download.
Frequently asked questions on depreciation
- ✅ What does a provision mean for depreciation of equity securities? This is the writing of a long-lasting decline in the purchase price.
- ✅ At what point? When the inventory value at the fence is lower than the acquisition cost and the loss appears to be durable.
- ✅ Deductible provision? Most often not, except real estate exceptions, companies outside PVLT.
- ✅ How do I record? Debit 68662, credit 2961 at the close; taken over from 78662/2961 at the time of adjustment.
- ✅ What evidence? A balance sheet, an expert report, a monitoring table or contracts are sufficient in most cases.
To view or download: standard writing scheme, summary table between accounting and taxation, Pennylane PDF guide, simulator available online.
Points of vigilance and regulatory compliance
The major issue on equity is not only the decline in their value, but also imperfect documentation or confusion between the accounting and tax rules. The auditors regularly target these aspects during an audit an expert recently mentioned that proofs and writing schemes are often the first request during a check.
Security checklist and documentation
- ✅ Systematically compare the acquisition value with the inventory value/utility value at each closing
- ✅ Document each estimate: expert report, proof of net position, detailed balance sheet
- ✅ Clearly identify membership in the PVLT tax system or an exception plan
- ✅ Reintegrate into extra-accounting if the provision is not deductible
Finally – when closing (or divestment), preparing for tax treatment and all supporting documents is generally essential. It's not always obvious... and often, it is the point of friction during fiscal control.