What content should be included in the notes to the financial statements to ensure they are in order?

Together with the balance sheet and income statement, the notes to the financial statements form part of the mandatory annual financial statements. All trading companies are required to prepare them at the end of the financial year.

However, depending on the size of your company and your sales figures, the content of the notes may vary. You can file a simplified appendix, an abbreviated appendix, or even be exempted from filing an appendix.

In this not-so-annex-dotic article, we take a look at all the different cases and the obligatory information to be included in the various appendices.

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What is an accounting schedule? Definition

The notes to the financial statements are an accounting document for companies operating as traders. It supplements the annual financial statements with the other two documents, namely :

• the balance sheet,
• the income statement.

Why prepare notes to the financial statements? The purpose of the notes is to provide additional "significant" information, or to explain certain data presented in the balance sheet or income statement. The ultimate aim is to make the company's annual financial statements easier to understand.

💡 Depending on the size of your company, the content of the notes varies: the notes may be expanded or simplified, or you may be exempt from them! Details further down in this article.

Contents of the "basic" notes to the accounts

Companies concerned

🏢 All trading companies must produce an accounting appendix with their annual financial statements at the time of closing.

Mandatory content

👉 Explanations and details of :

• accounting rules and methods used for :
  • depreciation of fixed assets,
  • inventory valuation,
  • financial commitments (e.g. pensions and similar benefits), etc.
• accrued income and expenses;
• income and expenses charged to another accounting period;
• finance leases;
• any exceptions to the 5-year amortization period for research and development costs;
• exceptional write-backs of depreciation;
• changes in accounting methods, etc.

Significant content

👉 This information helps to understand the balance sheet or income statement. They add meaning or context to the company's financial situation.

Examples of material disclosures include :

• the financial securities making up the share capital,
• sales breakdown,
• methods used to calculate amortization, provisions and depreciation,
• changes in fixed assets,
• the company's commitments to management, subsidiaries and affiliates, etc.

ℹ️ For a complete list of the basic notes to the financial statements, we recommend that you :

• refer to the official texts issued by the Autorité des Normes Comptables (ANC);
• use a sample set of notes.

Contents of simplified notes

Companies concerned

🏢 The companies concerned by the simplified appendix are those under the normal real tax regime, and which do not exceed two of the following three thresholds:

• for small companies :
  • a balance sheet total of 6 million euros,
  • sales of 12 million euros,
  • 50 employees,
• for medium-sized companies introduced by the PACTE law in 2019:
  • total balance sheet of 20 million euros,
  • sales of 40 million euros,
  • 250 employees,

What must be included in the simplified appendix?

👉 Certain information required in the basic appendix is not required in the simplified appendix. These disclosures are those set out in article R123-198 of the French Commercial Code, namely :

• remuneration of members of administrative, supervisory and management bodies;
• the breakdown of corporate income tax between exceptional items and other items, specifying the method used;
• the number, nominal value and rights conferred by bonds convertible into or exchangeable for similar securities;
• a breakdown of net sales by business sector and geographical area;
• a breakdown of headcount by category: employees or "made available to the company" during the year;
• the total amount of statutory audit fees, if any;
• Formation expenses;
• the financial impact of flows not included in the balance sheet;
• a potential future tax liability, resulting from the difference between the company's tax regime and the accounting treatment of income and expenses.

Contents of the abbreviated notes

Companies concerned

🏢 Companies covered by the abbreviated schedule are those subject to the simplified real income tax regime.

Mandatory content

👉 Mandatory content of the abridged appendix:

• explanations of the accounting methods used, such as the inventory valuation method ;
• table of changes in fixed assets with 5 columns;
• table of changes in depreciation and amortization;
• provisions and depreciation;
• the table of receivables and payables at year-end;
• a table of financial commitments not included in the balance sheet.

Microenterprises, exempt from the accounting appendix

Are you a micro-business within the meaning of Article L123-16-1 of the French Commercial Code (excluding holding companies)? In other words, you do not exceed at least two of the following three thresholds:

• total assets of €350,000,
• net sales of €700,000,
• 10 employees.

👉 Your company is exempt from producing an accounting appendix.

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How do I create an accounting appendix?

🗓️ When should I draw up notes to the accounts? At the end of each financial year, before closing the accounts.

🤔 How? As we have seen, there are several possible scenarios:

1. you are exempt from producing a schedule ;
2. you are required to produce notes, but these may be simplified or abridged.

As the appendix is an accounting document regulated by the French Commercial Code, depending on your financial and asset situation, rely on the list of mandatory information and fill in the expected fields.

Our advice:

• if you do your own bookkeeping, refer to the model appendix for help;
• or enlist the help of a chartered accountant, or an online chartered accountant, to save time and ensure the accuracy of your annual financial statements.