New French UCI Chart of Accounts

Background

The introduction of the new money market fund (MMF) regulations, the desire to improve comparability between all funds, and the new definition of net income, taking unrealised gains or losses into account in the result, has prompted a new chart of accounts proposal. The latter, via a new regulation 2020-07, will be applicable to all funds whose financial year will open as of 1 October 2023. This regulation applies to all investment funds with the exception of securitisation vehicles, OPCIs¹ and SCPIs².

The new regulation cancels and replaces:

• ANC Regulation No. 2014-01 of 14 January 2014 on the chart of accounts for open-ended collective investment undertakings, which is repealed, as are the subsequent regulations amending it: ​

• ANC Regulation No. 2016-04 of 1 July 2016 on French limited partnership companies (sociétés de libre partenariat, SLPs);

• ANC Regulation No. 2017-05 of 1 December 2017 amending ANC Regulation No. 2014-01;

• ANC Regulation No. 2018-04 of 12 October 2018 amending ANC Regulation No. 2014-01.

Main changes

This revision to the chart of accounts is particularly significant. More than half of the previous regulation has been amended to harmonise both the format of the presentation of financial statements and accounting treatments or to expand the scope of funds.

Following is a non-exhaustive series of illustrations of changes made:

• Fund scope

From now on, specialised finance organisations (organismes de financement spécialisés, OFSs) and French limited partnerships (sociétés de libre partenariat, SLPs) are clearly identified in the new scope of application of the chart of accounts. In addition, a "Money Market Fund" section is clearly identified in the regulation.

• Presentation of financial statements

UCIs as well as general purpose funds, private equity funds, etc. now use the same format for financial statements.

Elimination of off-balance sheet items, which will now be presented in the appendix.

For sub-funds, there is no longer an aggregated presentation; a report must be produced for each sub-fund.

The appendix must contain any relevant information that may influence investors' decisions (including on investment strategy, fund exposure profile, and types of financial instruments)

• Accounting treatments

Foreign exchange forwards must be included in off-balance sheet positions and no longer on the balance sheet.

Unrealised or realised capital gains and losses and transaction costs are included in the income statement.

Money market funds may distribute the unrealised item.

Digital assets are to be recorded in a sub-account known as "Other eligible assets".

The impacts for management companies and the valuation agent business

At this stage, it is necessary to recall that management companies are responsible for the net asset values that they must disclose as well as the information contained in the annual report. Asset management companies must therefore already work on this new chart of accounts, especially if they do not use an external service provider.

In addition, changing financial statements and increasing non-accounting information will impact our habits. We will need to prepare for increased exchanges between management companies and valuation agents. To that end, we need to work on future operational processes that will enable us to provide accurate, complete and, above all, clear information for clients.

The transition period between the two charts of accounts also requires preparation as the latter will require vigilance on the part of management companies and valuation agents in order to avoid discrepancies and ensure that everything is in order.

The deadline is imminent for this shift in the accounting paradigm. In truth, it is already here.

Aziz Adda, Regulatory Watch, Societe Generale Securities Services