Fixed Assets Accounting in Morocco: Comprehensive Guide to CGNC and Journal Entries

Introduction to Fixed Assets Accounting in Morocco

Fixed assets represent essential long-term goods intended to serve a company's activity durably. In Morocco, their accounting treatment is strictly governed by the General Accounting Standardization Code (CGNC) and the General Business Accounting Plan (PCGE). This guide explores each key stage, from initial valuation to depreciation, amortization, and asset disposal, ensuring compliance and optimal management of your assets.

Each fixed asset is tracked from its entry into the company, valued at acquisition or production cost, amortized according to a predefined plan, and potentially subjected to impairment tests. Obligations such as the fixed assets register and annual physical inventory are also fundamental for impeccable bookkeeping.

Classification of Fixed Assets according to PCGE

The PCGE classifies fixed assets into three main categories, each corresponding to a specific heading in class 2 of the balance sheet:

Intangible Fixed Assets (Class 21)

These assets, lacking physical substance, are identifiable and generate future economic benefits. They include:

• Formation and capital increase costs (2111): Notary fees, registration fees related to startup legal status creation.
• Patents, trademarks, rights, and similar values (2112): Industrial patents, licenses, trademarks (their registration can be crucial via a trademark registration service).
• Goodwill (2113): Customer base, leasehold rights, signage.
• Research and development fixed assets (2120): Capitalized R&D expenses.
• Other intangible fixed assets (2128): Acquired software, etc.

Tangible Fixed Assets (Class 23)

Generally the most significant part of fixed assets, they include physical goods used in operations:

• Bare land (2311) and developed land (2312)
• Buildings (2321)
• Technical installations (2331)
• Machinery and tools (2332)
• Transport equipment (2340)
• Office furniture (2351), office equipment (2352), and IT equipment (2355)

Financial Fixed Assets (Classes 24/25)

These cover equity investments (2510), capitalized loans (2481), deposits and guarantees paid (2486), and other financial receivables. Their accounting treatment is specific.

Valuation of Fixed Assets upon Entry

Initial valuation is critical. The CGNC favors the historical cost depending on the mode of acquisition.

Acquisition for Consideration

The acquisition cost includes:

• The purchase price (net of discounts and rebates).
• Customs duties and non-recoverable taxes.
• Directly attributable incidental costs (transport, installation, assembly, commissioning).
• Acquisition costs (fees, commissions, legal costs), which can be capitalized or expensed (accounting option).

Example: A company acquires an industrial machine for 500,000 DH excluding tax. Transport costs: 15,000 DH, installation costs: 25,000 DH. The entry cost will be 500,000 + 15,000 + 25,000 = 540,000 DH.

Self-Produced Fixed Assets

For a self-produced fixed asset, the production cost includes:

• Cost of raw materials and direct labor costs.
• Reasonably allocable indirect production costs.
• Financial costs: includable if related to a long production period (often more than 12 months).

Inventory entry is made by crediting account 7142 (Self-produced tangible fixed assets) or 7141 (intangible).

Acquisition by Contribution in Kind

The fixed asset is valued at the value agreed in the deed of contribution, validated by the statutory auditor. This value constitutes its entry cost.

Fixed Assets in Progress

Assets under construction or production are recorded in specific accounts (e.g., 2393 — Tangible fixed assets in progress). These expenses are not amortized until the asset is completed and put into service.

Upon completion and commissioning, a transfer is made:

The commissioning date marks the start of amortization calculation.

Amortization of Fixed Assets

Amortization is the systematic allocation of the cost of a fixed asset over its useful life, reflecting the consumption of its economic benefits.

• Starts on the date of commissioning.
• Calculated prorata temporis for the acquisition and disposal years.
• Land is generally not amortizable (except for quarrying land).
• The straight-line method is the most common in Morocco.

Amortization expenses are debited to account 6193 (amortization expenses for tangible fixed assets) and credited to account 283x (amortization of tangible fixed assets).

Impairment Test for Fixed Assets

An impairment test is mandatory when there are indicators of a loss in value. It compares the net book value (NBV) to the current value, which is the higher of fair value (market selling price) and value in use (expected future economic benefits).

If the current value is lower than the NBV, an impairment provision must be created for the difference:

If the current value subsequently increases, the provision can be reversed, but not exceeding the NBV that would have resulted without the impairment (i.e., after normal amortization).

Disposal of a Fixed Asset

Disposal involves removing the asset from the balance sheet and recognizing a gain or loss on sale.

The accounting steps:

1. Additional amortization up to the disposal date (prorata temporis).
2. Removal of the fixed asset:

3. Recognition of the selling price:

Example: Disposal of a vehicle (gross value 300,000 DH, amortized over 5 years). Acquired 01/01/N-3, sold 01/07/N for 100,000 DH excl. VAT. Annual amortization: 60,000 DH. Accumulated amortization as of 31/12/N-1: 180,000 DH. Additional amortization N (6 months): 30,000 DH. Total amortization: 210,000 DH. NBV: 300,000 − 210,000 = 90,000 DH. Disposal result: 100,000 − 90,000 = +10,000 DH (gain).

Scrapping of a Fixed Asset

Scrapping is the removal of an asset without financial consideration. The treatment is similar to disposal, but the selling price is zero. The residual NBV then becomes an exceptional expense. If the asset is fully amortized, its removal has no impact on the result:

Fixed Assets Register and Physical Inventory

Fixed Assets Register

It is mandatory to maintain a fixed assets register detailing for each asset: designation, acquisition date, entry cost, amortization method and rate, accumulated amortization, NBV, and disposal date. This tool is vital for management and as evidence during controls. Updating this register is often delegated to an expert firm specializing in bookkeeping services.

Annual Physical Inventory

The annual physical inventory must cover fixed assets to:

• Confirm the physical existence of assets.
• Identify missing, destroyed, or obsolete assets not yet removed from accounts.
• Reconcile the fixed assets register with accounting records.
• Detect impairment indicators.

A rigorous inventory ensures the reliability of financial statements.

FAQ — Fixed Assets Accounting in Morocco

What is the capitalization threshold in Morocco?

The CGNC does not set a monetary threshold. The determining criterion is the durable purpose of the asset (more than one fiscal year). Many companies adopt an internal threshold (often between 500 and 1,000 DH excl. VAT) for low-value assets, which they expense directly. This threshold must be applied consistently.

Should acquisition costs be capitalized or expensed?

The CGNC offers an option: acquisition costs can either be integrated into the asset's cost or expensed in the fiscal year. The chosen method must be applied consistently and mentioned in the ETIC.

How to account for a fixed asset acquired through finance lease (crédit-bail)?

Under CGNC, finance lease (leasing) is treated as a rental operation. Lease payments are expensed (account 6132). The asset does not appear on the lessee's balance sheet until the purchase option is exercised. IFRS standards (IFRS 16) adopt a different approach, where a right-of-use asset and a lease liability are recognized on the asset and liability sides, respectively.

Can fixed assets be revalued in Morocco?

Voluntary revaluation of fixed assets is possible but rarely practiced under CGNC. The revaluation difference is posted to equity (account 1130). Note: revaluation has significant tax implications as the latent profit may be taxable. Legal revaluations with specific tax regimes have been provided by past finance laws.

Conclusion

Fixed assets accounting in Morocco, governed by the CGNC, is a detailed and essential process for the financial health and compliance of any company. From initial recording to depreciation tracking and disposal, rigorous management is indispensable. By understanding and correctly applying these principles, companies ensure not only the reliability of their financial statements but also better strategic decision-making regarding their long-term assets. For expert assistance, iHub is your ideal partner for managing your accounting obligations.