LuxGAAP accounting in Luxembourg: standard chart of accounts and annual accounts.

What is LuxGAAP?

LuxGAAP is the body of Luxembourg accounting principles applicable to the vast majority of companies in the country. It is based on the standard chart of accounts (PCN), a standardised chart of accounts, and on the amended law of 19 December 2002, which frames accounting, annual accounts and their filing with the RCS.

The acronym is written interchangeably LuxGAAP, Lux GAAP or Luxembourg GAAP. There is no substantive difference between these spellings: all three designate the national accounting framework, as opposed to IFRS as adopted by the European Union and to foreign GAAP such as US GAAP, UK GAAP or the German HGB.

Under LuxGAAP, annual accounts comprise a balance sheet, a profit and loss account and notes. They are prepared mainly at historical cost, with a fair-value option for certain financial instruments and assets, depending on the company's choices.

One point is regularly misread: LuxGAAP is not a body of detailed standards comparable to IFRS. It is a legal framework, completed by a mandatory chart of accounts and by the guidance of the Commission des normes comptables. Where IFRS prescribes a treatment for each situation, LuxGAAP leaves the company a margin of judgement bounded by the prudence principle, which has to be documented in the notes.

Who has to keep LuxGAAP accounts?

The standard chart of accounts applies to Luxembourg commercial undertakings required to prepare annual accounts. Financial participation companies, SOPARFI included, have been subject to it since 1 January 2020, which ended a widespread practice of in-house charts of accounts in holding structures.

Several categories fall outside the PCN. Entities preparing their accounts under IFRS are exempt. So are individual traders and certain partnerships whose turnover does not exceed EUR 100,000, special limited partnerships, credit institutions, insurance and reinsurance undertakings, SEPCAV and SICAV, and entities under the prudential supervision of the CSSF, with the exception of professionals of the financial sector.

That exemption list is narrower than it looks. A standard SOPARFI, an operating company, a services SARL: all fall under the PCN without room for argument. The question only genuinely arises for regulated vehicles and for structures that have opted for IFRS.

The size category does not condition the application of LuxGAAP but the extent of the obligations that follow from it: the format of the accounts published, the content of the notes, and whether an audit by an approved statutory auditor is triggered.

What is the standard chart of accounts (PCN)?

The standard chart of accounts (PCN) is the Luxembourg standardised chart of accounts. It structures the recording of transactions into predefined classes and accounts, which harmonises the presentation of accounts and facilitates electronic filing with the RCS.

Keeping books that comply with the PCN is the foundation of LuxGAAP: we configure your accounting on this chart from takeover, so that your annual accounts and their eCDF filing follow seamlessly.

Annual accounts and RCS filing via eCDF

At year-end, the company prepares its annual accounts (balance sheet, profit and loss account, notes) under LuxGAAP. These accounts are then filed electronically with the trade and companies register (RCS) via the eCDF platform, in the standardised formats.

We handle the whole chain: ongoing bookkeeping, preparation of the annual accounts and eCDF filing, meeting the legal deadlines specific to your financial year.

Lux GAAP vs IFRS: what is the difference?

LuxGAAP is the national framework, based on the standard chart of accounts and on historical cost, with a fair-value option of limited use. IFRS is an international framework, markedly more fair-value oriented, mandatory for the consolidated accounts of companies whose securities are admitted to trading on an EU regulated market and optional for other entities since the law of 10 December 2010.

The heaviest difference in practice sits on leases. Under LuxGAAP an operating lease stays off balance sheet and rentals go through profit or loss. Under IFRS 16 nearly every lease enters the balance sheet as a right-of-use asset and a liability. For a company renting its premises and its fleet, the balance sheet total rises and gearing ratios deteriorate without a single financing decision having been taken.

The second structural difference sits on goodwill, amortised over its useful life under LuxGAAP and tested annually for impairment under IFRS. The first treatment smooths profit, the second makes it volatile. Then come deferred tax, recognised on a limited basis under LuxGAAP and in full under IFRS, and development costs, whose treatment changes the distributable base.

The choice is not symmetrical. LuxGAAP is the default framework for statutory accounts and for Luxembourg taxation, since taxable profit follows the commercial balance sheet. IFRS answers a need for comparability towards a group, a lender or an investor. Moving to IFRS therefore does not remove the need for a LuxGAAP reading of the tax position.

In most files the right configuration is not to pick a side but to run both cleanly: statutory accounts under LuxGAAP as the single source for filing and tax, and a documented, replayable set of IFRS restatements for group reporting. We support that passage in both directions, see accounting framework conversion and consolidation.

Size categories and obligations

The law distinguishes categories of companies (small, medium, large) based on thresholds of balance-sheet total, turnover and headcount. These categories determine the extent of the accounts to be published and any obligation to have the accounts audited.

We determine your size category, draw the consequences for the presentation and filing of accounts, and direct you towards an external audit when it becomes required.