On January 1st, 2005, in connection with the takeover to the IFRS standards, France implemented a significant accounting reform as regards assets (fixed assets, securities, inventory …). The reform applies to the statutory accounts of all French companies - quoted or not - at each step of an asset life (input, period of use, repair and disposal).
The hotel trade is notably concerned by these modifications when hotel buildings are booked as fixed assets. The building components (land, façades, waterproof material, roof, elevators, etc.) must now appear separately in the accounts, together with their economic lives. Specialists of the sector may be required to define the various components of the building, their value and their economic life.
In addition to issues relating to the hotel building itself, the new regulations for assets involve modifications in the applicable depreciation schedules.
Up to now, the depreciable lives used in the non-consolidated statutory accounts were based on the trade practices and on the French tax authorities’ recommendations.
Starting from January 1st, 2005, depreciable life must correspond to the actual use of the assets. As a consequence, the periodicity of the fixed asset actual renewal, and notably the hotel policy for renovation of bedrooms, lobbies, etc., must be taken into consideration when defining the depreciation schedules.
The hotel financial department is involved in the implementation process, as well as the technical department in charge of renewal and maintenance projects. The consequences of all these changes may be significant, and may require choices to be made by the hotel management. Statutory auditors have to check that the new regulations are implemented and have to approve their application. It is therefore advisable for hotel owners not totally aware of the issue to review their hotel assets, possibly with a specialist, and to apply the new regulations with approval of their statutory auditors.
