What should the notes to the accounts contain to ensure that the annual accounts are in order?

The notes to the accounts are part of the mandatory annual accounts, along with the balance sheet and profit and loss account. All trading companies must draw them up at the end of the financial year.

However, depending on the size of your business and your turnover, the content of the notes may vary. You can file a simplified schedule, an abbreviated schedule, or even be exempted from filing a schedule.

In this not-so-doctrinal article, we take a look at all the different cases and the compulsory information to be included in the various notes.

See all software Accounting

What are the notes to the financial statements? Definition

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

• the balance sheet
• the profit and loss account.

Why prepare notes to the accounts? 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 being to make it easier to understand the company's annual accounts.

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

Content of the "basic" notes to the accounts

Companies concerned

🏢 All trading companies must produce notes to the accounts with their annual financial statements at the time of closing the accounts.

Mandatory content

👉 Explanations and details of :

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

Material content

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

Information of material importance includes, for example:

• the financial securities making up the share capital
• the breakdown of sales
• the methods used to calculate depreciation, provisions and impairment,
• changes in fixed assets,
• the company's commitments to directors, subsidiaries or affiliated companies, etc.

ℹ️ For a complete list of information in the basic notes to the accounts, we recommend that you :

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

Contents of the simplified notes to the accounts

Companies concerned

🏢 The companies concerned by the simplified schedule are those subject to 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,
  • sales of €12 million,
  • 50 employees,
• for medium-sized companies introduced by the PACTE Act in 2019:
  • a balance sheet total 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 schedule is not required in the simplified schedule. These disclosures are those set out in Article R123-198 of the French Commercial Code, i.e. :

• remuneration of members of the administrative, supervisory and management bodies ;
• the breakdown of corporation tax between exceptional items and other items, specifying the method used;
• the number, nominal value and rights conferred by convertible bonds and bonds exchangeable for similar securities;
• a breakdown of net sales by business sector and geographical area;
• a breakdown of the workforce by category: employees or "made available to the company" during the financial 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.

Content of the abbreviated notes to the accounts

Companies concerned

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

Mandatory content

👉 Mandatory content of the abbreviated notes:

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

Micro-businesses, exempt from the requirement to prepare notes to the accounts

Are you a micro-business within the meaning of Article L123-16-1 of the 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 does not need to produce any notes to the accounts.

See all software Accounting

How do you prepare notes to the accounts?

🗓️ When should notes to the accounts be drawn up? At the end of each financial year, before the accounts are closed.

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

1. you are exempt from producing notes to the accounts ;
2. you must produce notes, but these may be simplified or abridged.

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

Our advice:

• if you do your own bookkeeping, refer to the model notes to help you ;
• or get help from a chartered accountant or an online chartered accountant to save time and ensure the accuracy of your annual accounts.