Landmark ruling on the classification of equity securities

In 2016, a French bank acquired shares in a Spanish bank and also subscribed to the latter’s capital increase.

These securities have been recorded in an equity securities account.

In 2017, these securities were written off, and the company recognized a loss on their disposal, a significant portion of which was classified as a long-term, non-deductible loss. The company also reversed the impairment provisions for these securities that had been deducted in prior years.

The company subsequently filed a complaint, asserting that it had made an accounting error by recording these securities in an equity securities account.

The Administrative Court of Appeal noted, however, that the acquisition of a 5% stake in the Spanish bank in 2010 had been presented "as part of an agreement under which the two credit institutions had decided to jointly undertake a partnership project […] as part of the group’s European development strategy."

It will conclude that there is no evidence to suggest that the purchases of shares and subscriptions to capital increases in the Spanish bank between 2010 and 2016 were carried out with any intention other than that described above, particularly since the French bank always held a seat on the boardadministration virtue of its stake.

It therefore finds that the French bank did not commit an accounting error by recording the securities in an equity account and that the claimant’s complaint is without merit.

CAA Paris, Nov. 6, 2025, No. 24PA00389

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