In the context of a merger, the French expression "boni de fusion" represents the positive difference between the share in the net assets received from the absorbed company, corresponding to the participation in this company, and the book value of this participation in the absorbing company's accounts.

In its 1994 and 1995 reports addressed to the President of the French Republic, the Commission des Operations de Bourse (C.O.B.), the French equivalent to the American S.E.C., indicates the way to book a "boni de fusion" on the accounts in the event of internal group restructurings.

Until the publication of these reports, the C.O.B. refused to consider the "boni de fusion" as a profit, as the internal restructuring operation was considered as a revaluation. Accordingly, the "boni de fusion" was treated as an unavailable revaluation capital gain entered on the liabilities side.

The C.O.B. innovates when adopting a valuation method of the contributions referring to consolidated statements. The choice for such a method would allow the "boni de fusion" to be referred as a "fair contribution value", corresponding to the total sum of reserves accumulated by the absorbed company, and evidenced in the consolidated accounts of the previous accounting years.

Consequently, if one admits that a distribution of the reserves of the absorbed subsidiary would lead to booking profits at the absorbing company's level, one should consider, by applying the principle of symmetry, that the "boni de fusion" should be booked in the accounts in the same way and should therefore be booked as income for the absorbing company.

If, however, the value of the "boni de fusion" calculated this way was higher than the value of the reserves evidenced in the absorbed company's accounts, the difference should be considered as a revaluation capital gain and no longer as income.

The content of this article is intended to provide a French guide to the subject matter.

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