Component Depreciation in France 2026: Method, Accounting and Tax Implications

Updated 15 May 2026.

Component depreciation is the mandatory accounting method in France whenever a tangible fixed asset contains distinct elements with different useful lives. In practice, buildings account for the vast majority of cases, but the rule also applies to complex industrial equipment, aircraft, ships, and any asset whose maintenance involves partial replacement at a different pace from the rest of the asset. This principle, set out in the French General Chart of Accounts (PCG) at Article 311-2, aligns with IFRS IAS 16 on this specific point, which facilitates convergence for groups reporting under international standards. At Hayot Expertise in Paris, we apply this method systematically to professional buildings, SCIs subject to corporate tax, and real estate holding structures.

Executive summary. For a significant tangible fixed asset, the PCG requires identifying each component whose useful life differs and depreciating it separately over that life. For a building worth EUR 1 million, this may mean 6 to 8 separate depreciation schedules — from 10 years for interior fit-out to 80 years for the structural shell.

PCG Art. 311-2 defines tangible fixed assets and introduces the obligation to decompose them when distinct elements have different useful lives. PCG Art. 322-1 addresses the basis and duration of depreciation, specifying that each component is depreciated over its own useful life. On the tax side, CGI Art. 39-1-2° allows the deduction of depreciation actually recognised, provided it stays within normally admissible limits and the mandatory minimum depreciation under CGI Art. 39 B is respected. The BOFiP (BOI-BIC-AMT-10-40) sets out the practical rules.

The logic is straightforward: if a roof is depreciated over 80 years when it lasts only 25, the annual charge is understated, reported profit is overstated, and stakeholders may believe the business is more profitable than it actually is. Component depreciation corrects this distortion.

IFRS IAS 16 vs French GAAP: partial convergence#

IAS 16 also requires component accounting when significant parts of an asset have different useful lives (§ 43-47 of the standard). The convergence is real on the principle, but the frameworks diverge on a few points:

• IAS 16 permits the revaluation model (fair value uplifts); the PCG allows this only in exceptional circumstances through a formal free revaluation procedure.
• Useful life estimates under IFRS are reviewed at each year end; under the PCG they remain fixed unless a justified change in estimate is warranted.
• The component approach under IFRS can be more granular in certain sectors (oil and gas, aviation).

For French SMEs under the PCG, IAS 16 is not directly applicable, but it serves as a useful doctrinal reference, particularly for groups consolidating under IFRS that also publish individual accounts under French GAAP.

A component is an element of a tangible fixed asset that simultaneously meets three conditions set by PCG Art. 311-2:

1. Significant unit cost relative to the total cost of the asset.
2. Different useful life from the main asset or from other elements.
3. Different renewal rhythm — the component will be replaced before or after the other elements.

If any one of these conditions is absent, decomposition is not required. Assessing whether cost is "significant" is a matter of professional judgement: no absolute numerical threshold is set by the texts. The Accounting Regulations Committee has acknowledged that company-specific thresholds (for example 1% of total asset cost) may be documented in the notes to provide consistency of treatment.

Buildings are the most documented and most frequent case. The table below shows the components typically identified and the depreciation periods generally accepted in French accounting practice. These ranges are indicative — the actual duration must be justified by the condition of the asset, architects' reports, cost estimates, or documented sector practice.

These periods are consistent with positions documented by the CNCC and CSOEC and with BOFiP guidance. They may be adjusted to reflect the actual condition of the asset, the nature of the activity carried on, and conditions of use.

Step 1: decomposition at acquisition#

The decomposition must be performed upon initial recognition of the asset, based on the total acquisition cost. The allocation between components relies on:

• Architects' or project managers' cost breakdowns.
• Detailed construction or acquisition invoices.
• Land registry data for the land element (which is never depreciated and must be separated).
• Where detailed data are unavailable, a documented estimated allocation disclosed in the notes.

Land is always separated as it is not depreciable. For professionally occupied buildings, the land fraction is typically estimated at 15 to 30% in dense urban areas (to be verified against local market data).

Step 2: straight-line depreciation by component#

Each component is depreciated on a straight-line basis over its own useful life. Declining-balance depreciation is not applicable to buildings; it applies to certain equipment (industrial machinery, some technical equipment) under CGI Art. 39 A. Component depreciation does not prevent applying the declining balance to an eligible component, but this is rare for buildings.

Step 3: component renewal#

When a component is replaced — for example, the roof is fully replaced after 22 years — the accounting entry has two steps:

1. Derecognition of the old component: elimination of its gross carrying amount and accumulated depreciation, recognition of the residual net book value in the income statement (a loss if the component was not fully depreciated).
2. Recognition of the new component: capitalisation of the replacement cost as a fixed asset, commencement of depreciation over the new estimated useful life.

This is the most frequent error observed in files we review: replacement works are posted to maintenance expense (account 615) when they should be capitalised as a component replacement. This error understates assets, distorts reported profit, and constitutes an anomaly detectable in the FEC during a tax audit.

Accounts used#

• 213 (Buildings) broken into sub-accounts: 213000 (shell/structure), 213100 (roof), 213200 (facade), 213300 (heating/plumbing), 213400 (electrical), 213500 (interior fit-out), 213600 (technical equipment).
• 681 — Depreciation charge (income statement).
• 281 — Accumulated depreciation of tangible fixed assets (balance sheet, split by component).
• 675 — Net book value of derecognised assets (on component disposal).

Consider a building acquired for EUR 1,000,000 excluding VAT, of which EUR 150,000 is land (not depreciable). The depreciable base is EUR 850,000. An illustrative decomposition might be:

Without decomposition, depreciating the whole asset over 40 years would yield an annual charge of EUR 21,250. The component method produces EUR 29,551 — EUR 8,300 more per year, driven mainly by the shorter-life components.

Deductibility of depreciation charges (CGI Art. 39-1-2°)#

Component depreciation charges are tax-deductible provided they are recognised in accordance with professional practice and the useful lives are documented. The DGFiP generally accepts useful lives supported by cost estimates, architects' reports, or sector practice. In a tax audit, the consistency between the adopted useful life, the condition of the asset, and market data is the central point of scrutiny.

Mandatory minimum depreciation (CGI Art. 39 B)#

CGI Art. 39 B requires that a depreciation charge at least equal to straight-line depreciation be recognised each year. Shortfalls are permanently lost — they cannot be caught up in later years. This is a risk to monitor in loss-making years when a manager might be tempted to skip a depreciation charge to artificially inflate reported profit.

Specific limits (CGI Art. 39-4)#

For passenger cars, CGI Art. 39-4 caps the depreciable base according to the vehicle's CO2 emissions. A company car acquired for EUR 60,000 may have a deductible base capped at EUR 18,300 or EUR 30,000 depending on the case (indicative 2025 amounts, subject to annual adjustment — to be confirmed against the current BOFiP).

Since the PCG was updated, the choice between component depreciation and a single overall useful life has been settled: component depreciation is mandatory wherever the conditions of PCG Art. 311-2 are met. This is not an option but a normative requirement.

The financial and tax impact is threefold:

• Higher charges in early years of ownership: short-life components produce larger depreciation charges in the first years, reducing taxable income during that period.
• More faithful balance sheet: net asset values more accurately reflect the actual condition of the property — relevant for credit analysis, disposals, or contributions in kind.
• Better anticipation of renewals: identifying components early facilitates future planning and maintenance budgeting.

The initial valuation of components is an accounting obligation, not an optional recommendation. In practice it requires:

• Collection of architects' reports, construction cost breakdowns, or detailed acquisition invoices.
• Where such documents are unavailable, a documented estimated allocation by the chartered accountant, with disclosure of methods and assumptions in the notes.
• For older buildings acquired without detailed cost information: reference to published sector ratios or a technical survey.

Revaluation of components during the life of the asset is permitted by the PCG but rarely undertaken, as it creates significant administrative and tax complexity.

A Paris-based SME acquires an office building in the 16th arrondissement for EUR 5 million (including EUR 900,000 of land, not depreciable). The depreciable base is EUR 4.1 million. At acquisition, the cabinet works with the buyer to collect construction cost breakdowns and establishes a 7-component decomposition. Total annual depreciation by components comes to approximately EUR 140,000, against the EUR 82,000 that a single 50-year useful life would have produced. Over the first 5 years, the difference in deductible charges represents approximately EUR 290,000 — a material reduction in the corporate tax base, entirely founded on correct application of the applicable rules.

Derecognising a component at renewal is the step requiring the most rigour: the gross carrying amount of the outgoing component must be reconstructed, accumulated depreciation calculated, residual net book value determined, and the disposal gain or loss recognised. Without these entries, the balance sheet accumulates ghost assets — already-replaced components still on the books — which distorts the balance sheet for lenders and constitutes an anomaly detectable in the FEC during a tax audit.

A family SCI holds a rental property in Paris acquired in 2012. At acquisition, no component decomposition was performed — a frequent error before audits on this point became more systematic. In 2025, the roof is fully replaced for EUR 95,000. Two questions arise.

Question 1: can the work be capitalised? Yes — full replacement of a component must be capitalised. Posting these EUR 95,000 to maintenance expense would be incorrect and challengeable in a tax audit.

Question 2: what to do about the original "roof" component never separately identified in 2012? A retrospective correction is possible: estimate the initial value of the component, recalculate accumulated depreciation, and correct the balance sheet, with disclosure in the notes. For an SCI subject to corporate tax, the residual net book value of the old component is written off as a deductible loss in the year of replacement. The annual depreciation on the new roof (EUR 95,000 / 25 years = EUR 3,800 per year) is then deductible each year. For an SCI taxed at the partner level under income tax rules, depreciation is not deductible — component decomposition is therefore not relevant in that framework.

1. No decomposition at acquisition. The most widespread error on buildings acquired before approximately 2015. It is not irreparable — a retrospective correction is possible — but requires rigorous accounting reconstruction. In a tax audit, the absence of decomposition may prompt the DGFiP to challenge the overall depreciation rate applied.

2. Excessive granularity. Identifying 15 to 20 components creates unnecessary complexity when minor components do not meet the significance criteria. A decomposition into 5 to 8 well-documented components is generally sufficient and defensible.

3. Failure to derecognise the old component at renewal. Capitalising replacement costs without removing the old component from the balance sheet results in double-counting of assets — systematically flagged in FEC reviews during tax audits.

4. Confusion between maintenance and replacement. Routine maintenance remains an expense. Full replacement of a component justifies capitalisation. The distinction rests on the nature of the work, supported by estimates and invoices.

Component depreciation is not gratuitous administrative complexity: it is the accounting translation of the physical reality of a building. A property is not a monolithic block that degrades uniformly — it is an assembly of technical systems, each with its own lifecycle.

Our recommendation for clients acquiring a professional building or holding an SCI:

• Invest 2 to 3 hours at acquisition to document the decomposition using available cost information. This upfront work avoids costly corrections years later.
• Archive architects' reports, cost estimates, and technical surveys in the permanent file. In a tax audit, these documents are what justify the useful lives adopted.
• Do not confuse simplification with omission: a decomposition into 5 well-chosen, documented components is far preferable to no decomposition at all.

On the tax side, correctly applying the component method produces higher deductible charges in the early years of ownership — not through artificial structuring, but simply by applying the rules. This is a legitimate outcome that many SMEs and SCIs fail to capture because the decomposition was not structured at the point of acquisition.

This article is for information purposes only. It does not replace an analysis of your specific situation, acquisition documents, legal structure, and the rules applicable at the date of your transactions. Consult your chartered accountant before making any decision.

Sources: PCG Art. 311-2 and 322-1 (Légifrance), CGI Art. 39-1-2°, 39 B and 39-4 (Légifrance), BOFiP BOI-BIC-AMT-10-40, IFRS IAS 16 (IASB).