WHAT ACCOUNTING FOR AN ASSOCIATION
Although an association is not a for-profit organization, it must rigorously control its resources and expenditures to ensure the proper use of funds. Maintaining proper accounting not only ensures compliance with legal obligations, but also builds trust among members, partners, and donors. Depending on its size and funding sources, an association may be subject to more or less strict accounting rules. Accounting helps demonstrate good governance, highlight activities, and justify grants received.
THE ACCOUNTING OBLIGATIONS OF AN ASSOCIATION
Obligations concerning all associations:
It is necessary for associations to keep accounts, but the law of July 1st 1901 (which governs associations in France) does not impose any obligation on them in this matter.
The managers of a small association can choose between keeping cash accounting (chronological tracking of receipts and disbursements) or accrual accounting. The latter method will be more appropriate for reporting to members, partners, and funders on the use of a membership fee, grant, or donation.
The association’s statutes may, however, contain specific rules on the obligation to keep accounts, either at the request of the general meeting or at the request of an administrative authority.
Consequently, “small” associations, mainly required to report to their members, will be able to limit themselves to so-called single-entry accounting, which will be embodied by a chronological recording of expenses and income, in a simple notebook, without erasures or surcharges. Moreover, Decree No. 2106-1971 deliberately aims at the fact that the association which requests a subsidy but which is not required to establish annual accounts by virtue of a legal or regulatory obligation, will provide the administration only with its approved financial statements for the last closed financial year.
Accounting obligations specific to certain associations:
- Associations receiving public aid of more than €23,000: These associations must prepare their approved annual accounts and submit them with their grant application.
- Associations receiving public subsidies exceeding €153,000: They are required to prepare accounts in accordance with the association accounting plan, an annual balance sheet, an annual income statement, and an appendices. These accounting documents must be published in the “Official Journal”. In addition, they must appoint a legal auditor.
- Associations that have received a municipal grant representing more than 50% of the municipal budget or more than €75,000 must keep accounts and prepare an annual balance sheet of their results and appendices. They must provide these documents to the municipality, which will attach the certified balance sheet to their budget.
- Associations recognized as being of public utility: These associations must establish their annual balance sheet, the income statement, an annex as well as an annual report. They must be able to present these accounting documents upon any request from public authorities.
- Associations appealing to the public for generosity: In addition to the obligations incumbent on associations recognized as being of public utility, they must also establish an annual account of the use of resources collected from the public when donations exceed € 153,000.
- Associations whose exclusive purpose is assistance, charity, scientific or medical research: These associations are required to keep accounts in accordance with the association accounting plan. In addition, if they wish to apply for a donation, they must attach a forecast budget for the current financial year as well as the annual accounts for the last 3 financial years (or the financial years since its creation date if the company is less than 3 years old).
- Sports associations: These associations are required to keep accounts, prepare an annual budget, have it adopted by the board of directors, and have their accounts approved by the general meeting.
If revenue from sporting events exceeds €1,200,000, or if the compensation paid to athletes exceeds €800,000, the formation of a commercial company is mandatory.
- Associations engaged in lucrative economic activity: They are required to prepare a chart of accounts, annual accounts, and an appendix.
They are also required to appoint an auditor when they meet two of the following three criteria:
- the annual balance sheet total is greater than or equal to €1,550,000;
- the annual turnover is greater than or equal to €3,100,000;
- the average workforce is greater than or equal to 50.
In addition, when they carry out an activity subject to commercial taxes (VAT, corporate tax), they must keep accounts in accordance with the association accounting plan, an annual balance sheet and an income statement. They must also keep a VAT registration book.
- Associations in receivership or liquidation proceedings are required to prepare annual accounts for the last financial year which they must file with the court.
THE ASSOCIATIVE ACCOUNTING PLAN
The specificities of the association accounting plan:
First of all, it should be noted that this accounting framework aims to harmonize the accounting practices of associations. It not exclusively concern associations, but also applies to non-profit organizations in general, such as works councils, foundations and endowment funds.
In terms of its form, it adopts the model of the corporate accounting plan. However, some differences can be noted, the main ones being the following:
- The valuation of in-kind donations (provision of equipment, volunteer work, etc.) at the end of the income statement;
- The presentation of the balance sheet and income statement according to summary table models;
- The recording of investment grants without distinction, in a revenue account;
- The treatment of loans for use in the form of a voluntary in-kind contribution;
- Some terms have been adjusted, for example, “profits” has become “surpluses,” and “losses” has been replaced by “deficits.”
This association’s accounting plan consists of eight account categories, each encompassing several sub-accounts:
- Class 1: Capital accounts
- Class 2: Fixed asset accounts
- Class 3: Inventory and work-in-progress accounts
- Class 4: Third-party accounts
- Class 5: Financial accounts
- Class 6: Expense accounts
- Class 7: Revenue accounts
- Class 8: Treatment of voluntary contributions in kind
The reform of the accounting plan applicable since January 1st 2025:
This modernization pursues three main objectives:
- Facilitate the digitalization of annual accounts;
- Update annual account models and the accounting classification;
- Simplify annual account templates.
The mandatory implementation of the new regulation is effective for accounts for financial years beginning on or after January 1st 2025 (ANC No. 2022-06 of November 4th 2022).
This reform will therefore have an impact on the accounts of associations, foundations, endowment funds, and any other non-profit organization required to present accounts in accordance with the association accounting plan.
The main points of the reform are as follows:
- Elimination of the expense transfer account – The consequences are as follows:
- Service re-invoices are recorded in account 708 “Income from ancillary activities”;
- Staff expense re-invoices are recorded in account 7084 “Provision of invoiced personnel”;
- Insurance compensation (theft or fire) will be recorded in account 7587 “Insurance compensation” or in account 757 “Proceeds from disposal of tangible and intangible assets” in the event of total destruction or theft of an asset;
- In many cases, expense reimbursements will be deducted from expense accounts instead of being recorded in a revenue account.
This new accounting method must involve detailed monitoring of certain expense accounts. Indeed, the collection of refunds from a previous financial year will reduce the balance of the expense account in question. This will have the effect of reducing the annual expense of the item in question. This fact should therefore be presented and explained in the appendix.
- Changes to the concept of exceptional income: The definition of exceptional income
in ANC Regulation No. 2022-06 is no longer analyzed by nature, but rather by the event. Thus, income and expenses directly related to a major and unusual event must be recognized as exceptional income.
It should be noted, however, that the assessment of the major and unusual nature of an event is specific to each entity. The same event, in a specific circumstance, may be characterized differently.
Presentation of accounts:
The chart of accounts is constructed based on the following two principles:
- It must include all three-digit accounts, as this level corresponds to the usual needs of account management and control;
- It must include, at a minimum, the subdivisions necessary for preparing the annual financial statements, so that a single account is linked to only one item in the balance sheet or income statement.
The new chart of accounts retains only (in the basic and abbreviated systems) two modernized balance sheet and income statement models; namely:
Balance sheet models in tabular format before allocation;
Profit and loss statement models in list format.
Entities may use more advanced balance sheet and income statement models (adapted to their activities) if they comply with the models contained in the chart of accounts.
Note: It is possible to omit a balance sheet or income statement item that does not contain any amount, either for the current or previous financial year.
Regarding the annex, associations, foundations and other non-profit organizations are not subject to the rules of the Commercial Code. The developed accounting annex must be produced (no absence or presentation of a simplified annex).
In conclusion:
It is essential to check whether your association has been brought into compliance with accounting standards during the 2025 financial year. It is also advisable to gather the information and data to be included in the accounting appendix now.
We can obviously help you overcome the technical aspect of this task.
