Current Tax Developments - Gain On Mergers

In the context of a merger, the French expression "boni de fusion" represents the positive difference between the share in the net assets received from the absorbed company, corresponding to the participation in this company, and the book value of this participation in the absorbing company's accounts.

In its 1994 and 1995 reports addressed to the President of the French Republic, the Commission des Operations de Bourse (C.O.B.), the French equivalent to the American S.E.C., indicates the way to book a "boni de fusion" on the accounts in the event of internal group restructurings.

Until the publication of these reports, the C.O.B. refused to consider the "boni de fusion" as a profit, as the internal restructuring operation was considered as a revaluation. Accordingly, the "boni de fusion" was treated as an unavailable revaluation capital gain entered on the liabilities side.