In brief: In Morocco, the CGNC is the default accounting framework, while IFRS standards are mandatory for companies listed on the Casablanca Stock Exchange, credit institutions (Bank Al-Maghrib circulars) and insurance companies (ACAPS). The differences relate to the valuation of fixed assets, the treatment of lease contracts, the accounting for financial instruments and the structure of financial statements. Understanding these gaps is essential for Moroccan groups undertaking a transition to or consolidation under international standards.
Regulatory Framework: Who Applies What?
The Moroccan accounting landscape is built on a dual framework:
The CGNC (Code Général de Normalisation Comptable), established by the decree of 25 December 1992, applies to all merchants as defined by the Code de Commerce. It is supplemented by Law 9-88, which sets out accounting obligations, and by the PCGE, which structures the chart of accounts.
IFRS standards (International Financial Reporting Standards) are mandatory for:
- Listed companies on the Casablanca Stock Exchange, for their consolidated financial statements (AMMC circular)
- Credit institutions subject to Bank Al-Maghrib (BAM) directives
- Insurance and reinsurance companies under ACAPS supervision
The statutory (individual) accounts remain subject to the CGNC, even for listed companies. This coexistence creates divergences that finance departments must manage on a daily basis.
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Overall Comparison Table
| Topic | CGNC | IFRS |
|---|---|---|
| General approach | Asset-based, historical cost | Economic, fair value preferred |
| Conceptual framework | Accounting principles under Law 9-88 | IASB Conceptual Framework (2018) |
| Financial statements | Balance sheet, CPC, ESG, TF, ETIC | Statement of financial position, comprehensive income, cash flow statement, changes in equity, notes |
| Primacy | Legal form | Economic substance |
| Revaluation of assets | Exceptional (free revaluation) | Permitted under the revaluation model (IAS 16) |
| Goodwill | Amortised over estimated useful life | Not amortised, annual impairment test (IFRS 3/IAS 36) |
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Tangible Fixed Assets: IAS 16 vs CGNC
Initial Measurement
Under the CGNC, fixed assets are recognised at acquisition cost or production cost, which forms the definitive valuation basis. IFRS (IAS 16) applies the same initial principle but adds the obligation to include estimated decommissioning and restoration costs in the asset’s cost.
Subsequent Measurement
This is where the major divergence lies:
- CGNC: historical cost is maintained. Free revaluation is possible but rarely practised. Depreciation is straight-line or declining balance, with no obligation to revise the schedule.
- IAS 16: two models to choose from — the cost model (similar to CGNC) or the revaluation model (fair value at regular intervals). The depreciation period must reflect the actual useful life and be reviewed at each closing.
Component Approach
IFRS requires a decomposition of fixed assets into components with distinct useful lives (for example: building structure 40 years, roof 20 years, technical installations 15 years). The CGNC does not explicitly provide for this component approach, although some companies adopt it voluntarily.
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Lease Contracts: IFRS 16 vs CGNC
IFRS 16 profoundly changed the treatment of lease contracts since 2019, creating one of the most significant gaps with the CGNC.
| Aspect | CGNC | IFRS 16 |
|---|---|---|
| Classification | Finance lease (crédit-bail) vs operating lease | Near-elimination of the distinction for the lessee |
| Lessee — operating lease | Lease expenses in the income statement | Recognition of a right-of-use asset and a lease liability |
| Balance sheet impact for lessee | None (off-balance sheet) | Simultaneous increase in assets and liabilities |
| Income statement impact | Straight-line charge (rent) | Depreciation of the right-of-use asset + financial interest on the debt |
| IFRS 16 exemptions | — | Contracts < 12 months and low-value assets (< USD 5,000) |
Practical impact: a listed Moroccan company that leases its offices, vehicle fleet and IT equipment will see its IFRS balance sheet significantly “heavier” than its CGNC balance sheet, with a higher debt-to-equity ratio. Financial ratios must be interpreted accordingly.
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Financial Instruments: IFRS 9 vs CGNC
The treatment of financial instruments is another area of major divergence.
Classification and Measurement
The CGNC classifies securities into three simple categories: equity investments (account 251x), held-to-maturity securities (account 258x) and marketable securities (account 350x). Valuation is at cost, with a provision for impairment if the current value is lower.
IFRS 9 introduces a classification into three categories based on the business model and cash flow characteristics:
- Amortised cost: assets held to collect contractual cash flows
- Fair value through OCI (Other Comprehensive Income): assets held to collect and sell
- Fair value through profit or loss: all others, including derivatives
Impairment: Expected Losses vs Incurred Losses
The most impactful difference concerns the impairment model:
- CGNC: provision recognised only in cases of probable incurred loss (incurred loss approach)
- IFRS 9: expected credit loss model (ECL), which requires provisioning from the origination of the loan, even in the absence of a default event
This ECL model has a considerable impact on Moroccan banks, which must set aside provisions from the moment credit is granted, significantly increasing the cost of risk in their IFRS accounts.
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Provisions: IAS 37 vs CGNC
Provisions for risks and charges are governed differently:
| Criterion | CGNC | IAS 37 |
|---|---|---|
| Recognition conditions | Probable risk, estimation possible | Present obligation, probability of outflow of resources, reliable estimate |
| Provisions for major repairs | Permitted | Prohibited — treatment through components (IAS 16) |
| Discounting | Not required | Mandatory if the time value effect is significant |
| Restructuring provisions | Flexible criteria | Strict criteria: detailed plan announced, well-founded expectation among third parties |
IAS 37 is generally more restrictive than the CGNC on recognition conditions, but the discounting obligation can lead to higher provisioned amounts for long-term obligations.
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Financial Statements: Comparative Structure
The CGNC financial statements and IFRS financial statements differ in their structure and philosophy:
CGNC structure (5 statements): Balance sheet, CPC, ESG, Funding table, ETIC — with an asset-based approach centred on working capital.
IFRS structure (5 components, IAS 1): Statement of financial position, Statement of profit or loss and other comprehensive income (OCI), Cash flow statement (IAS 7), Statement of changes in equity, Notes — with an approach oriented towards cash flows and economic performance.
The concept of comprehensive income in IFRS has no equivalent in the CGNC. It includes, beyond net income, changes in fair value of financial instruments through OCI, revaluation surpluses and translation differences.
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Convergence Outlook in Morocco
The Conseil National de la Comptabilité (CNC) has been working for several years on a gradual alignment of the Moroccan framework with international standards. The identified convergence areas include:
- Introduction of the component approach for fixed assets
- Improvement of asset impairment rules
- Modernisation of the funding table into a cash flow statement
- Strengthening of disclosures in the notes
This convergence is progressive and takes into account the specificities of the Moroccan economic fabric, predominantly composed of SMEs for which full IFRS application would be disproportionate.
For Moroccan companies subject to both frameworks, a specialised chartered accountant is essential to manage consolidation restatements and ensure compliance of both the CGNC statutory accounts and the IFRS consolidated accounts.
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Frequently Asked Questions
Can a non-listed Moroccan SARL adopt IFRS?
No, the statutory accounts of Moroccan companies must be prepared in accordance with the CGNC and Law 9-88. Voluntary adoption of IFRS is not provided for by regulation for individual accounts. However, a non-listed group may choose to prepare its consolidated accounts under IFRS voluntarily, particularly to meet the requirements of international investors.
How is goodwill treated under CGNC vs IFRS?
Under the CGNC, goodwill (écart d’acquisition) is recognised as an intangible asset and amortised over its estimated useful life (generally 5 to 20 years). Under IFRS (IFRS 3 / IAS 36), goodwill is never amortised but is subject to an annual impairment test. If the recoverable amount of the CGU is lower than its carrying amount, an irreversible impairment loss is recognised.
What is the impact of IFRS 16 on debt-to-equity ratios?
The application of IFRS 16 simultaneously increases assets (right-of-use) and liabilities (lease liability) on the balance sheet. The debt-to-equity ratio mechanically deteriorates, which may affect compliance with bank covenants. EBITDA improves, however, as lease charges are replaced by depreciation (excluded from EBITDA) and financial interest.
Legal references:
- CGNC — Code Général de Normalisation Comptable (1992)
- Loi 9-88 — Obligations comptables des commerçants
- IFRS Standards: IAS 1, IAS 16, IAS 36, IAS 37, IFRS 3, IFRS 9, IFRS 16
- AMMC Circulars — Consolidated accounts of listed companies
- BAM Directives — Accounting framework for credit institutions
READ ALSO:
- CGNC in Morocco: Fundamental Accounting Principles
- General Chart of Accounts for Enterprises (PCGE)
- Financial Statements in Morocco: Balance Sheet, CPC, ESG, TF and ETIC
- The 7 Accounting Principles in Morocco
Need assistance with IFRS transition or consolidation of your accounts? Contact Upsilon Consulting, a chartered accountancy firm in Casablanca, for a personalised assessment.
