Technical merger déficit (mali technique): definition, calculation and accounting treatment
The mali technique is a technical accounting gap arising in French mergers. Learn its definition, calculation formula, distinction from the true merger loss, and accounting treatment in 2026.
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Quick answer: what is the mali technique in a French merger?#
The mali technique (technical merger déficit) is the component of the merger déficit (PCG art. 745-4) that corresponds, up to the shareholding, to the latent gains on the absorbed company's assets. It is not a loss: it is allocated to those assets (accounts 2081, 2187, 278, 4781) and tracked as an asset, not expensed.
Updated April 2026 - The technical merger déficit, known in French as the mali technique, is one of the most misunderstood concepts in French merger accounting. It is not an economic loss. It is a technical gap reflecting unrealised latent gains on the assets of the absorbed company that were never revalued on its books. For M&A professionals, PE investors, and CFOs involved in French company mergers, mastering this concept is essential for sound accounting treatment and tax compliance.
Also read Deferral of taxation on a share contribution, TUP: universal transfer of assets and liabilities and Business transfers.
Definition of the technical merger déficit#
The merger déficit (mali de fusion) is defined by the PCG (art. 745-3) as the negative difference between the net assets (positive or negative) received by the absorbing company (société absorbante), up to its shareholding in the absorbed company (société absorbée), and the net book value of the cancelled shares. The technical déficit (mali technique) is only one component of it (art. 745-4): up to the shareholding, it represents the latent gains on the absorbed company's assets (whether recorded or not), net of unrecorded liabilities.
It arises in mergers measured at book value: the assets transferred are recorded at their net book value, which is lower than the net book value of the cancelled shares, even though those shares embedded latent appreciation, unrecorded goodwill, undervalued fixed assets, customer relationships, brands and patents. The technical merger déficit therefore represents a latent value tracked separately on the balance sheet.
The legal framework has evolved: CRC regulation 2004-01 was integrated into the French GAAP (Plan comptable général, ANC regulation No. 2014-03), then amended by ANC regulation No. 2015-06 (recognition and tracking of the technical déficit) and ANC regulation No. 2017-01 (mergers and equivalent transactions). The reference framework is now the PCG (art. 741 onwards), no longer CRC 2004-01.
Technical déficit vs true merger loss: a critical distinction#
Two distinct components can arise in a French merger, and confusing them leads to serious accounting and tax errors.
The technical déficit (mali technique) corresponds to the portion of the total gap that is attributable to identifiable latent gains on the absorbed company's assets. Goodwill, trademarks, property, plant and equipment : assets whose fair value exceeds net book value. This component is justified economically and is capitalised as an intangible asset.
The true merger loss (mali réel or mali vrai) corresponds to the residual gap that cannot be explained by any identifiable latent value. It reflects a real economic loss: the shareholding was overvalued at the time of acquisition. French GAAP does not leave it pending a later provision: this impairment, or additional impairment, of the shareholding is recognised in the absorbing company's financial result, in the year the transaction is carried out (PCG art. 745-4).
The distinction is fundamental because the accounting and tax treatment diverges completely between the two components.
Quick decision: telling the two components apart
| Criterion | Technical déficit (mali technique) | True merger loss (mali réel) |
|---|---|---|
| Nature | Latent gains on the assets (PCG art. 745-4) | Economic loss: shares overvalued at acquisition |
| Recognition | Allocated to underlying assets (2081, 2187, 278, 4781), residual to account 207 "Fonds commercial" | Financial result of the year of the transaction (PCG art. 745-4) |
| Later tracking | Amortised or taken to income like the linked asset (PCG art. 745-7), impaired under art. 745-8, and follows the asset on disposal (art. 745-10) | None: the charge is recognised in one go |
| Tax (special régime, art. 210 A) | No subsequent deduction (art. 210 A, 1, third paragraph CGI) | Long-term capital loss regime (art. 39 duodecies CGI) where the cancelled shares are participating interests held for at least two years, otherwise an ordinary-rate charge |
| Watch-out | Document the allocation asset by asset | Substantiate the loss economically |
How to calculate the technical merger déficit: step-by-step#
Step 1: calculate the total merger gap#
Total déficit = Net book value of the cancelled shares - Net assets received (up to the shareholding)
Worked example:
- Net book value of the cancelled BETA shares: €2,000,000
- Net book value of BETA at merger date: €800,000
- Total gap = €2,000,000 - €800,000 = €1,200,000
Step 2: allocate the technical déficit to underlying assets#
Identify the latent gains on identifiable assets of the absorbed company:
- Goodwill (assessed by an independent expert): latent gain of €600,000
- Industrial equipment (fair value exceeds net book value): latent gain of €200,000
- Total identifiable latent gains: €800,000
The allocation follows a two-branch rule (PCG art. 745-5). Where the technical déficit exceeds the sum of the reliably estimated latent gains on identified assets other than goodwill, it is allocated to those assets and the residual amount to goodwill. Where it is lower, it is allocated to the contributed assets in proportion to the latent gains. It is this second branch that applies here.
In our example, out of a total gap of €1,200,000:
- Technical déficit (allocable to assets): €800,000
- True merger loss (non-allocable): €400,000 → recognised in financial result
Step 3: treat the true merger loss#
The true loss of €400,000 does not represent recoverable value. It is neither allocated to an asset nor spread over time: French GAAP (PCG art. 745-4) requires it to be recognised in the financial result of the year in which the merger is completed. For tax purposes, the burden is on the absorbing company to establish that the loss is real: it is admitted only where the shares were acquired on arm's length terms and the actual net assets received are lower than their acquisition price (BOFiP BOI-IS-FUS-10-50-20, § 60).
Accounting treatment of the technical merger déficit#
Balance sheet recognition#
Since ANC regulation 2015-06 (financial years beginning on or after 1 January 2016), the technical déficit is no longer booked globally to goodwill: it is allocated to the underlying assets and recorded in a dedicated account for each asset category (PCG art. 745-6). The French chart of accounts opens four such accounts: 2081 (technical deficit on intangible assets), 2187 (tangible assets), 278 (financial assets) and 4781 (current assets). Only the unallocated residual is attached to account 207 "Fonds commercial" (goodwill). The déficit thus appears on the asset side of the absorbing company's balance sheet at its allocated value.
Allocation schedule#
Under ANC standards, the technical déficit must be allocated across the underlying assets to which it relates. This allocation and the tracking of values are disclosed in the notes to the financial statements; in practice, the mali allocation schedule is documented in the merger treaty and carried over into the notes. Each asset receives its share of the déficit proportional to its identified latent gain.
Amortisation rules#
The déficit is amortised over the remaining useful life of the underlying assets:
- Allocated to depreciable fixed assets → amortised over their remaining life
- Allocated to goodwill (not systematically amortisable under French GAAP) → subject to annual impairment testing, with no systematic amortisation
- Allocated to a building → amortised over the remaining depreciation schedule
In practice: tracking the technical déficit after the merger
Allocation by asset category+
Each portion of the déficit is attached to the asset that carries the latent gain, in a dedicated account for each category (PCG art. 745-6): 2081 (intangibles), 2187 (tangibles), 278 (financial), 4781 (current assets). Only the unallocated balance goes to account 207 "Fonds commercial" (goodwill).
Disposal of the underlying asset+
On a disposal, a contribution or any other transaction involving the underlying asset, the déficit receives the same treatment as that asset (PCG art. 745-10); it is also amortised or taken to income on the same terms (art. 745-7). For tax purposes, the release of that portion of the déficit is a charge that is deductible or not from the corporate income tax base at the standard rate, depending on the tax regime specific to the asset sold (BOFiP BOI-IS-FUS-10-50-20, § 210).
Impairment of the déficit (PCG art. 745-8)+
An impairment is recognised as soon as the current value of the underlying asset falls below its net book value increased by the allocated portion of the déficit, and it is charged first against the technical déficit portion. The residual déficit attached to goodwill follows the impairment rules for goodwill: once an impairment has been recognised under PCG art. 214-17, no reversal is possible.
Disclosure in the notes+
The allocation of the déficit and the tracking of values are disclosed in the notes to the financial statements. The allocation schedule, in practice documented in the merger treaty, is carried over there.
Recording the merger déficit: the accounting entry#
The merger déficit is recorded in a single entry, at the date of the transaction: the absorbing company recognises the assets and liabilities received at the values shown in the merger treaty (PCG art. 720-1), clears account 261 "Titres de participation" for the net book value of the cancelled shares, and books the negative difference to the déficit accounts.
The key point is that the merger déficit is not recorded in a single block. It is first split between the technical déficit and the true merger loss (art. 745-4), then the technical déficit is allocated by asset category (art. 745-5 and 745-6).
| Portion of the déficit | Account to debit | French chart of accounts caption | Later tracking |
|---|---|---|---|
| Technical déficit on intangible assets | Debit 2081 | Mali de fusion sur actifs incorporels | Amortised or released like the asset (art. 745-7) |
| Technical déficit on tangible assets | Debit 2187 | Mali de fusion sur actifs corporels | Amortised over the asset's remaining life |
| Technical déficit on financial assets | Debit 278 | Mali de fusion sur actifs financiers | Follows the financial asset |
| Technical déficit on current assets | Debit 4781 | Mali de fusion sur actif circulant | Released with the current item |
| Unallocated residual | Debit 207 | Fonds commercial (goodwill) | Impairment test, no reversal (art. 745-8) |
| True merger loss | Charge in the financial result | (no dedicated account) | None: charged in the year of the transaction (art. 745-4) |
Two warnings follow from this table. First, French GAAP opens four distinct déficit accounts, not a single account 207: booking the whole entry to goodwill is the most common mistake, and it then distorts the entire amortisation schedule. Second, the true merger loss has no asset account: it is not provisioned, it is charged straight to the financial result of the year in which the merger is completed.
Amortisation and impairment of the déficit are likewise recorded in dedicated accounts by asset category (PCG art. 745-9), which allows each portion to be tracked until the asset carrying it leaves the balance sheet.
Tax treatment of the technical merger déficit#
The tax treatment of the technical déficit depends on the merger tax régime. Under the special merger régime (Article 210 A CGI), the technical déficit gives rise to no deduction: the BOFiP guidelines (BOI-IS-FUS-10-50-20) state that capitalising it cannot lead to any subsequent tax deduction, amortisation and impairment of the déficit having no effect on taxable income. Under the standard tax régime, by contrast, the amortisation or impairment of the portion allocated to depreciable assets may affect taxable income. Article 38 quinquies of Annex III to the CGI, which concerns the original value of fixed assets, is not the basis for this non-deductibility.
The true merger loss follows a different regime. According to the tax guidelines (BOFiP BOI-IS-FUS-10-50-20, § 50), it is in principle a capital loss falling within the long-term regime of Article 39 duodecies CGI where the cancelled shares are participating interests within the meaning of the third paragraph of a quinquies of I of Article 219 CGI, held for at least two years. Where the shares have been held for less than two years, the charge representing the true merger loss is deductible from taxable income at the standard rate.
Representative example (illustrative, non-nominative)
A company absorbs a subsidiary and recognises a technical déficit of €700,000: €200,000 allocated to equipment depreciated over 4 years and €500,000 to goodwill.
- Under the special régime (art. 210 A CGI): neither the equipment amortisation (€50,000 per year) nor any impairment of the goodwill is déductible. The déficit stays tax-neutral (BOFiP BOI-IS-FUS-10-50-20).
- Under the standard régime: the amortisation of the portion allocated to equipment may, by contrast, affect taxable income.
The régime chosen in the merger treaty therefore directly changes the tax charge: it is a trade-off to frame upfront, not an outcome to endure.
Merger déficit and TUP: accounting in a universal asset transfer#
The transmission universelle de patrimoine (TUP), or confusion de patrimoine, is the transaction governed by Article 1844-5 of the French Civil Code: where all the shares are held by a single owner, dissolution transfers the company's entire estate to the sole shareholder, with no liquidation. In accounting terms it does not escape the déficit rules: French GAAP expressly brings the confusions de patrimoine of Article 1844-5 within the scope of mergers and equivalent transactions (PCG art. 710-1 and 710-2).
Three rules govern how the déficit is recorded in a TUP.
Always at book value+
A dissolution by confusion de patrimoine is by definition carried out between entities under common control: the assets and liabilities of the dissolved entity are therefore always transferred at their book value (PCG art. 760-1). That is precisely the configuration in which a technical déficit arises, since it is recognised where the net value of the shares held exceeds the net book assets received (art. 745-4, which covers mergers and universal asset transfers measured at book value).
The same treatment as in a merger+
The treatment of the déficit and of the surplus arising on cancellation of the shares in the books of the recipient of the TUP follows the general rules of PCG art. 745-2 to 745-9 (art. 760-2). In other words: the same split between technical déficit and true merger loss, the same allocation to underlying assets, the same accounts 2081, 2187, 278, 4781 and 207, and the same tracking.
No retroactivity, and a specific entry date+
Retroactivity is not provided for by the Civil Code in a confusion de patrimoine: the PCG articles on retroactivity do not apply (art. 760-3). The entries are taken up in the books of the receiving entity once the creditors' opposition period provided for in Article 1844-5 of the Civil Code has expired. It is this lag, often overlooked, that determines which financial year the déficit belongs to.
For tax purposes, a TUP calls for extra care where it transfers negative net assets (liabilities exceeding the fair value of the assets). The II bis of Article 209 CGI provides that where liabilities taken over exceed the fair value of the assets transferred, the charge corresponding to that excess cannot be deducted. The tax guidelines apply that non-deductibility expressly to mergers and universal asset transfers governed by Article 1844-5 of the Civil Code, whether or not the transaction is placed under the special merger regime (BOFiP BOI-IS-FUS-10-50-20, § 70).
The rôle of the merger auditor (commissaire à la fusion)#
The allocation of the technical déficit requires a fair value assessment of the absorbed company's underlying assets. In France, this is typically performed by or in conjunction with the commissaire à la fusion (merger auditor) or commissaire aux apports (contribution auditor), depending on the structure.
The auditor's report validates:
- the fair value of the transferred assets
- the consistency of the déficit allocation
- compliance with applicable ANC standards
Without this report : or where the valuation is insufficiently documented : the accounting treatment becomes vulnerable to challenge by tax authorities or statutory auditors.
Two distinct engagements, often given to the same professional
| Merger auditor (commissaire à la fusion) | Contribution auditor (commissaire aux apports) | |
|---|---|---|
| Legal basis | Art. L. 236-10 of the Commercial Code | Art. L. 225-147 (SA) and L. 223-9 (SARL) |
| Purpose | Fairness of the exchange ratio, relevance of relative values | Valuation of contributions in kind |
| Appointment | By court decision | By court decision |
| Waiver | Possible by a unanimous decision of the shareholders of all participating companies (art. L. 236-10, II) | Subject to the legal conditions specific to the entity form |
In force since 1 January 2024 (ordinance No. 2023-1142 of 6 December 2023). In practice, the merger auditor is frequently also appointed contribution auditor; it is their report that documents the values used to allocate the technical déficit.
The merger surplus (boni de fusion): the reverse situation#
The boni de fusion (merger surplus) is the mirror image of the mali. French GAAP (PCG art. 745-2) defines it as the positive difference between the positive net assets received by the absorbing company, up to its shareholding in the absorbed company, and the carrying value of that shareholding. It therefore arises where the net assets received exceed the carrying value of the cancelled shares, the exact opposite of the merger déficit of art. 745-3.
It is not recognised as extraordinary income. PCG art. 745-2 requires it to be booked in the financial result up to the share of earnings accumulated by the absorbed company since acquisition and not distributed, and in equity for the residual amount (or where those accumulated earnings cannot be reliably determined).
For tax purposes, under the special regime, the second paragraph of 1 of Article 210 A CGI exempts the gain arising on cancellation of the shares: the exempt portion recognised in financial result is then deducted off the books on form 2058-A-SD (BOFiP BOI-IS-FUS-10-50-20, § 1). Outside the special regime, that gain is taxable under the regime applicable to the cancelled shares.
Hayot Expertise insight: the documentation of the mali technique is as important as the calculation itself. An incomplete or informal allocation schedule exposes the absorbing company to an accounting challenge or a tax reassessment. We strongly recommend preparing this file before filing the merger treaty.
Comprehensive worked example#
Structure: Company ALPHA absorbs its wholly owned subsidiary BETA.
- Net book value of the cancelled BETA shares: €1,500,000
- BETA's net book value at merger date: €600,000
- Total gap: €900,000
Fair value analysis of BETA's assets:
- BETA's goodwill (valued by independent expert): latent gain of €500,000
- Industrial equipment (fair value > net book value): latent gain of €200,000
- Total technical déficit allocated: €700,000
- Residual true merger loss: €200,000 → recognised in financial result
Accounting entries at ALPHA, déficit allocated by asset category (PCG art. 745-5 and 745-6):
- Debit 207 "Fonds commercial": €500,000 (portion allocated to goodwill)
- Debit 2187 "Mali de fusion sur actifs corporels": €200,000 (portion allocated to equipment)
- True merger loss of €200,000: in the financial result of the year of the merger (PCG art. 745-4), not as a provision
- Amortisation of déficit allocated to equipment: over 3 remaining years (€66,667/year), at the same pace as the asset (art. 745-7)
- Déficit allocated to goodwill: impairment test, with no reversal possible (art. 745-8)
Conclusion#
The technical merger déficit in French accounting is a concept at the intersection of asset valuation, accounting standards, and restructuring tax law. Handling it correctly requires rigorous pre-merger analysis, a formally documented allocation, and structured accounting follow-up until the underlying assets are amortised or disposed of. In 2026, the requirements of ANC standards and the increasing scrutiny of tax authorities on restructuring transactions make this rigour essential for any French merger.
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(Official sources: ANC regulations No. 2014-03 (French GAAP, art. 745-1 to 745-8), No. 2015-06 (technical déficit) and No. 2017-01 (mergers); BOFiP BOI-IS-FUS-10-50-20 and art. 210 A CGI for the special régime; art. 39, 1, 5° CGI for provisions; art. L. 236-10 of the Commercial Code for the merger auditor. CRC regulation 2004-01 is the historical origin, now integrated into the PCG.)
Frequently asked questions
What is the difference between the technical merger déficit and the true merger loss?+
The technical déficit (mali technique) is the portion of the merger déficit explained by latent gains on the absorbed company's identifiable assets; it is allocated to those assets in dedicated accounts (2081, 2187, 278, 4781), the residual going to account 207 "Fonds commercial" (goodwill). The true merger loss (mali réel) reflects a real economic loss because the shareholding was overvalued at acquisition; it is recognised in the financial result of the year of the transaction (PCG art. 745-4). The distinction is fundamental for both accounting and tax treatment.
How is the technical merger déficit amortised?+
The déficit is amortised over the remaining useful life of the underlying assets to which it has been allocated. Where allocated to depreciable equipment with 5 remaining years, the corresponding déficit is amortised over 5 years. Where allocated to goodwill (not systematically amortisable under French GAAP), it remains on the balance sheet and is subject to annual impairment testing.
Is the technical merger déficit tax-déductible in France?+
It depends on the régime. Under the special merger régime (Article 210 A CGI), the technical déficit gives rise to no deduction: the BOFiP guidelines (BOI-IS-FUS-10-50-20) rule out any subsequent deduction, amortisation and impairment having no tax effect. Under the standard régime, the amortisation or impairment of the portion allocated to depreciable assets may affect taxable income. The true merger loss is only déductible where a provision meets the conditions of Article 39, 1, 5° CGI.
Is a merger auditor required to treat the technical merger déficit?+
Generally yes. The commissaire à la fusion or commissaire aux apports validates the fair value of transferred assets, the déficit allocation, and compliance with ANC standards. Their report is the primary safeguard against a tax reassessment or statutory audit challenge. Where no auditor is required by law, the valuation documentation must be especially robust.
Which account is used to record the technical merger déficit?+
The technical déficit is not booked globally to goodwill: it is allocated to the underlying assets and recorded in a dedicated account for each asset category (PCG art. 745-6). The French chart of accounts opens four such accounts: 2081 (intangible assets), 2187 (tangible assets), 278 (financial assets) and 4781 (current assets). Only the unallocated residual goes to account 207 "Fonds commercial" (goodwill).
How is the merger déficit calculated?+
In two steps. First the total déficit, equal to the negative difference between the net assets received by the absorbing company up to its shareholding and the carrying value of that shareholding (PCG art. 745-3). Then the split: the portion explained by latent gains on the absorbed company's assets, whether recorded or not and net of unrecorded liabilities, is the technical déficit (art. 745-4); the remainder is the true merger loss. The technical déficit is finally allocated to the assets, in full and in proportion to the latent gains where it is lower than them, with a residual to goodwill where it exceeds them (art. 745-5).
How is the merger déficit recorded in a TUP?+
Exactly as in a merger. A universal asset transfer (Article 1844-5 of the Civil Code) falls within the scope of mergers and equivalent transactions under French GAAP (PCG art. 710-1 and 710-2), and the treatment of the déficit and surplus there follows the general rules of art. 745-2 to 745-9 (art. 760-2). Two specifics: the assets and liabilities are always transferred at book value, a TUP being by definition carried out under common control (art. 760-1); and there is no retroactivity, the entries being taken up once the creditors' opposition period has expired (art. 760-3).
What is the difference between the boni and the mali de fusion?+
Both measure the same difference, in opposite directions. The boni is the positive difference between the net assets received by the absorbing company up to its shareholding and the carrying value of that shareholding; the mali is the negative difference (PCG art. 745-2 and 745-3). Their accounting differs sharply: the boni goes to financial result up to the accumulated undistributed earnings since acquisition and then to equity for the residual, whereas the mali is split between a technical déficit allocated to assets and a true merger loss charged to financial result.
Is the true merger loss tax-deductible in France?+
That depends on the nature of the cancelled shares and how long they were held. According to the tax guidelines (BOFiP BOI-IS-FUS-10-50-20, § 50), the true merger loss is in principle a capital loss falling within the long-term regime of Article 39 duodecies CGI where the shares are participating interests held for at least two years; below two years, the charge is deductible at the standard rate. In every case the absorbing company must establish that the loss is real, which is admitted only where the shares were acquired on arm's length terms and the actual net assets received are lower than their acquisition price (§ 60).
Article written by Samuel HAYOT
Chartered Accountant, registered with the Institute of Chartered Accountants. Certified Pennylane trainer.
Regulated French accounting and audit firm based in Paris 8, built to support companies across France with a digital and decision-oriented approach.
Sources
Official and operational sources cited for this page.
- Légifrance - Arrêté du 7 juin 2004 homologuant le règlement CRC 2004-01
- Légifrance - Arrêté du 20 décembre 2024 homologuant des règlements ANC
- ANC - Plan comptable général, règlement ANC 2014-03 consolidé au 1er janvier 2026 (art. 710-1, 745-1 à 745-10, 760-1 à 760-3)
- Légifrance - Article 210 A du CGI (régime spécial des fusions, 3e alinéa du 1 : aucune déduction ultérieure du mali technique)
- Légifrance - Article 1844-5 du code civil (transmission universelle de patrimoine sans liquidation)
- BOFiP BOI-IS-FUS-10-50-20 - Règles fiscales du boni et du mali de fusion
- BOFiP BOI-IS-FUS-10-50-10 - Règles comptables du boni et du mali de fusion
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