Lux GAAP vs IFRS: Which accounting standard in Luxembourg?

Main differences between Lux GAAP and IFRS

Lux GAAP is based on the prudence principle and historical cost: assets are valued at their acquisition price and unrealised gains are not recognised. IFRS favour fair value and economic substance over legal form. Under IFRS, lease contracts (IFRS 16) appear on the balance sheet as assets and liabilities, whereas under Lux GAAP operating rents remain as expenses. Financial instruments are also treated differently: Lux GAAP applies the lower of cost or market value principle, while IFRS 9 imposes a three-category classification with forward-looking impairment rules.

When is IFRS mandatory?

• Companies whose securities are admitted to trading on an EU regulated market (consolidated accounts mandatorily in IFRS)
• Credit institutions and insurance undertakings regulated by the CSSF (per regulation)
• Voluntary parent companies seeking better international comparability
• Investment funds subject to international reporting requirements

Challenges of converting from Lux GAAP to IFRS

The transition requires a complete gap analysis, the revaluation of certain balance sheet items (fixed assets, provisions, financial instruments), the implementation of information systems capable of producing dual reporting, and the training of accounting teams. The cost of a first conversion is generally between €50,000 and €200,000 depending on the complexity of the company. It is recommended to start the project at least 18 months before the desired transition date.