A C# program consists of one or more source files, known formally as compilation units (16.1). A source file is an ordered sequence of Unicode characters. Source files typically have a one-to-one correspondence with files in a file system, but this correspondence is not required.

Conceptually speaking, a program is compiled using three steps:

1 Transformation, which converts a file from a particular character repertoire and encoding scheme into a sequence of Unicode characters.

2 Lexical analysis, which translates a stream of Unicode input characters into a stream of tokens.

3 Syntactic analysis, which translates the stream of tokens into executable code.

Conforming implementations must accept Unicode source files encoded with the UTF-8 encoding form (as defined by the Unicode standard), and transform them into a sequence of Unicode characters. Implementations may choose to accept and transform additional character encoding schemes (such as UTF-16, UTF-32, or non-Unicode character mappings).

[Note: It is beyond the scope of this standard to define how a file using a character representation other than Unicode might be transformed into a sequence of Unicode characters. During such transformation, however, it is recommended that the usual line-separating character (or sequence) in the other character set be translated to the two-character sequence consisting of the Unicode carriage-return character followed by Unicode line-feed character. For the most part this transformation will have no visible effects; however, it will affect the interpretation of verbatim string literal tokens (9.4.4.5). The purpose of this recommendation is to allow a verbatim string literal to produce the same character sequence when its source file is moved between systems that support differing non-Unicode character sets, in particular, those using differing character sequences for line-separation. end note]