Hedge accounting under French GAAP: ANC Regulation 2015-05 explained for a mid-sized company

ANC Regulation No. 2015-05 of 2 July 2015 rewrote the accounting for forward financial instruments in individual financial statements. It applies to financial years beginning on or after 1 January 2017 and sits in the French chart of accounts (PCG), Articles 628-1 to 628-18. For a mid-sized company hedging its FX, it answers a simple question: at year-end, what do you do with a forward or an option that has not yet matured?

The principle: hedge or isolated open position

Contract notional amounts are not on the balance sheet: they are disclosed as off-balance-sheet commitments (Article 628-1). Changes in their value, however, are treated in two opposite ways depending on whether the contract forms part of a hedging relationship or is an isolated open position (Article 628-4).

When is a transaction a hedge?

A hedging relationship links a hedged item and a hedging instrument, with the aim of reducing the risk of an adverse impact on profit, cash flows or equity (Article 628-6).

• The hedged item can be a receivable, a payable, a commitment, or a future transaction not yet committed if it is precisely defined and sufficiently probable. It can be hedged in part, in amount or in duration (Article 628-8).
• The hedging instrument can be a forward, an option or a combination of both (Article 628-7).
• A sold option can only be a hedge in exceptional cases — notably when it hedges an opposite optional exposure, or combines with another instrument without creating a net sold option position.
• Qualification is made at inception and kept until settlement, unless the company's financial management changes.

Documentation: four elements, proportionate

The chart of accounts requires minimum documentation (Article 628-10):

1. identification of the hedged item(s);
2. identification of the hedging instrument(s);
3. identification of the hedged risk;
4. a qualitative or quantitative justification of how the transaction reduces the risk.

The text adds an important nuance: the more uncertain the hedged flow, the more precise the documentation must be. Hedging a budget of future sales requires more justification than hedging an issued invoice.

The symmetry principle

Income and expenses on the hedging instrument are recognised in profit at the same pace as those on the hedged item (Article 628-11). In practice, a forward hedging a dollar purchase of goods generates no result along the way: its effect is recognised when the purchase itself is booked, and on the same line of the income statement.

Forward points and option premiums: policy choices

"Optimised" structures: the sensitive point

This is the part of the text that most directly concerns mid-sized companies, because banks often offer them "zero-premium" hedges that embed a sold option. The chart of accounts distinguishes two cases:

1. 1
   Optimisation without additional risk

   The sold option adds no risk at inception. The transaction follows hedge accounting, with specific disclosure in the notes (Article 628-16).

2. 2
   Optimisation with additional risk

   The transaction combines a component that would be a hedge and a component that adds risk — typically an amount doubled if a barrier is breached. Each component is treated separately: the first as a hedge, the second as an isolated open position, with a provision for its unrealised loss (Article 628-17).

The isolated open position

Changes in the value of a derivative that hedges nothing are recorded on the balance sheet, in transitional accounts: 4741 for an unrealised loss, 4751 for an unrealised gain. The unrealised gain does not enter profit; the unrealised loss is provided for in the financial result. The provision can be measured on homogeneous groups of derivatives with the same underlying (Article 628-18).

When the hedge ends

• The instrument is settled or matures while the hedged item still exists: its realised result continues to follow the hedged item.
• The company ends the relationship, or the instrument no longer meets the criteria: the cumulative unrealised result up to that date follows the hedged item, and subsequent changes are treated as an isolated open position.
• The hedged item disappears in whole or in part: the instrument kept becomes, proportionately, an isolated open position, and any realised result deferred on the balance sheet is recognised immediately.

These three cases are set out in Article 628-14.

What the notes must say

For each category of derivatives, the notes give the fair value and information on the volume and nature of the instruments, linked to the description of hedging strategies. For hedges, they state the amount of realised gains and losses deferred on the balance sheet. Finally, they include a narrative on the strategies pursued, notably the use of optimisation transactions (Article 838-13).

Sources

• French Accounting Standards Authority (ANC), Regulation No. 2014-03 on the French chart of accounts (PCG), consolidated version as of 1 January 2026: Articles 122-2, 628-1 to 628-18 and 838-13; account nomenclature 4741 and 4751.
• ANC Regulation No. 2015-05 of 2 July 2015 on forward financial instruments and hedging transactions, applicable to financial years beginning on or after 1 January 2017.
• ANC Regulation No. 2022-06 on the modernisation of financial statements, applicable since 1 January 2025.