In a decision dated February 20, 1996, the Versailles Administrative Court rejected the argument put forward by the administration, ruling that the exchange loss connected to the spread payment, in Dutch florins, of the price of a fixed asset is part of its price and therefore should be booked as such, according to article 38 quinqies of annex III to the French tax code. The administration itself had reconsidered its former position in an instruction 4 D-3-95, after the Administrative Supreme Court ruled, in a decision dated June 28, 1991, that the price booked in the accounts at the time of entry of a fixed asset in the company's patrimony had to be considered as a definitive price.

Hence, an increase of this price due to risky payment means (payment of a life annuity, of indexed annuities or spread payments in foreign currency) must be treated as an immediately deductible financial charge.

This ruling by the Versailles Administrative Court falls in line with the accounting principle under which the financing cost of an asset, which is a financial charge, should be distinguished from its purchase cost.

The content of this article is intended to provide a French guide to the subject matter. Specialist advice should be sought for your specific circumstances.

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