16.2 Accounting date

In the 2021 version, we introduce the Accounting date function, which makes it possible to correct errors from previous periods in a selected period with the accumulated effect of the error calculated and recorded at the selected date. This functionality is available for customers with a service contract or the pro subscription.

Please note that IAS 8 requires restatement of previous financial statements if the error is material. The Accounting date function, as described below, can’t be used in these situations. Immaterial errors are not required to be corrected, but if you want IFRS 16 liability, ROU asset, instalment, interest, and depreciation to be correct going forward, the Accounting date function is useful. The Accounting date function works on operating leases, financial leases and subleases.

The Accounting date function is available for customers with the pro version or with a service contract with us.

The Accounting date function is only available after it’s turned on by the admin user. This is to avoid confusion in the date-to-date registration of contracts. We recommend turning the function off after you’ve made the correction.

For those who use accumulated figures in the accounting integration model, the result should be the same if you correct an error back in time. The function can be useful in situations where an error relates to a previous fiscal year.

The Hide and Unhide settings can be found under Settings: IFRS 16: Show additional options.

For a contract that you have forgotten to register, you can set the accounting date to recognize the accumulated effect when the Accounting date function is turned on.

After the contract is published, the accounting date will be locked and can only be accessed through the Log change function.

Please note that the Change date is the date that the change should have been recorded, and the accounting date is when the actual change is recorded and the accumulated effect is recognized. The accounting date can only be set after the change date.

You might need to open the Reporting period to register a new contract or change to an existing contract before the accounting date. The Reporting period is found under Settings: IFRS 16.

Below are examples of the use of the Accounting date function:

16.2.1 A lease contract has not been registered when it was entered

In June 2021 Company A becomes aware of that a lease contract, effective from October 1st 2020, due to a mistake was not included in the calculation as of the year-end 2020. The error is not material, but since Company A wants the figures to be correct going forward, they use the Accounting date function.

Before you start, turn on the Accounting date function under Settings (See above).

1) Enter the new contract with the correct data, including the correct start of the lease payments

2) Set the accounting date as the date of the financial close (In this example, June 30th 2021). This is found under the IFRS 16 scope section.

3) Click Save as draft, update the calculation and review the result.

The accumulated effect of payments, interest, instalments and depreciations are recorded in June 2021, and the Lease liability and the ROU assets are recorded at the same date, taken into effect that the contract started on October 1st 2020. The contract is now correctly recorded.

16.2.2 Forgot to register index regulation

In this case, Company A normally registers the index regulation in December the previous year, when the regulation is known, even if it’s not effective until January 1st. Since one contract was overlooked and not regulated in December 2020 and this is discovered after the year end 2020 and quarter 1 2021 are closed, Company A decides to make the correction on June 30th 2021 for the q2 close. The error is not material.

Use the change log (Adjust index or rate) for the contract.

Enter the correct change date (In this example December 31st 2020), the accounting date (June 30th 2021) and then the new lease payment (In this case from 200.000 to 205.000).

Click Save and update the calculation file.

The adjustment of the ROU asset and the lease liability is recorded in June 2021. The correction in payment, which has accumulated to 10.000 (Two increased payments of 5.000) is registered at the same date, and the accumulated effect of interest, instalments and depreciation is registered in June 2021. Going forward, the contract will be accounted for, as the correction was done at the correct time, in December 2021.

16.2.3 A contract was entered with incorrect lease payments

Company A discovers that the lease payments for a contract includes non-lease payments that exaggerate the IFRS 16 lease payments and ROU asset. They want to correct this contract by reducing the monthly lease payment from 10.000 to 8.000 from the commencement of the contract (September 1st 2020), recording the effect at the financial close, June 30th 2021.

Go to Log other change of the actual contract.

Set the change date to September 1st 2020 (The commencement date of the contract) and the accounting date at the date when you want the correction to be made (In this example, June 30th 2021).

Change the lease payments from 10.000 to 8.000 under Amount.

Click Save and update the calculation file.

The change represents the NPV effect of the change in lease payments from the commencement of the contract to the date of the change. In this example, we are referring to a reduction in the monthly payment from 10.000 to 8.000. The sum of overstated payment (The net of 9 overstated payments of 2.000 minus the actual payment in June of 8.000) and the accumulated effect of 9 months of overstated interest and depreciation plus the actual interest and depreciations for June 2021 can be viewed under the Lease Payments column.

Please note that if the contract has been index adjusted, you need to roll back to the version before the index adjustment and register it again.

16.2.4 Discount rate is not correct

Company B discovers that the discount rate was set to 4% instead of 3.5% for a lease contract at the implementation of IFRS 16 on January 1st 2019. Since the contract is material for the company, they’ve decided to make this correction. The correction was made on June 30th 2021.

Go to Log other changes and set the change date to January 1st 2019 and the accounting date to June 30th 2021.

Make the change to the discount rate from 4% to 3.5%.

Click Save and update the calculation file.

In June 2021, the interest is reduced (With an adjustment to instalments) due to a previously overstated interest rate. Depreciations, on the other hand, have increased due to an increase of the NPV of the contract on January 1st 2021. This is because of the reduced discount rate that increases the NPV of the contract.

16.2.5 Exercise of an extension option was not registered in the correct period

Company A has an option to extend a lease contract with an additional 3 years from July 1st 2021. When the accounting department asks the housing department, they’re informed that they already signed an agreement to extend the contract in December 2020. The accounting department decides that for the interest and depreciations to be correct, going forward, to use the Accounting date function to calculate the accumulated effect in June 2021, by exercising the option in December 2020 instead of now. The alternative is just to extend the option in June 2021.

Go to Log other changes and set the change date to December 31st 2020 and the accounting date to June 30th 2021. Uncheck the box under Unused to change the status of the option you want to exercise.

Review and update the discount rate (Here, reduced from 4% to 3.5%).

Click Save and update the calculation file.

The accumulated effect is calculated in June 2021. If you’re uncertain about the accuracy of the figure, you can review how the calculation would look like if the exercise of the option was registered in the correct period, by turning off the Accounting date function under Settings on the Menu page.

As you can see illustrated above, the figures are consistent.

16.2.6 Forgot to change the discount rate when exercising an extension option

On December 31st 2020, Company A registered a change to exercise an option to extend a lease contract with an additional 3 years from July 1st 2021. In June 2021, however, they discovered that they had forgotten to change the discount rate when exercising the extension option. The accounting department decides to use the Accounting date function to change the discount rate and calculate the accumulated effect in June 2021.

Go to Log other changes and set the change date to December 31st 2020 and the accounting date to June 30th 2021.

Change the discount rate from 4% to 3.5%.

Click Save and update the calculation file. The accumulated effect is calculated in June 2021.

16.2.7 Change the start date of a contract to an earlier or a later date

Company A discovers that a lease with a start date set to January 1st 2021 actually started on October 1st 2020. They decide to correct this error, using the Accounting date function.

The original registration:

Go to Log other changes and set the change date to the start date, January 1st 2021, and the accounting date to June 30th 2021. Then change the start date to October 1st 2020. The accounting date is the date on which you want the change to be recorded.

Click Save and update the calculation file.

If the contract starts on a later date, such as April 1st 2021, you can go to Log other changes and set the change date to the start date, January 1st 2021, and the accounting date to June 30th 2021. You then change the start date to April 1st 2021.

Click Save and update the calculation file.

16.2.8 Change in the asset removal obligation

Company B discovers that the asset removal obligation (Registered in Share Control) for an asset has changed from an estimated EUR 100.000 to EUR 200.000. The change is not registered and company B want the change to be registered in June 2021.

The original registration:

The ARO increases the ROU asset with EUR 100.000.

Go to Log other changes and set the change date to the start date, January 1st 2019 and the accounting date to June 30th 2021. Then go to General to change the ARO obligation from EUR 100.000 to EUR 200.000.

16.2.9 Change post-paid to prepaid

Company B is informed by the auditor that a prepaid contract is registered as post-paid. They consider the error not material, but points out that the lease liability might be overstated at the financial close. Company B decides to make the correction that has been there since the implementation of the contract from January 1st 2019 in June 2021.

The original registration:

Go to Log other change.

Set the change date to January 1st 2019 and the accounting date to June 30th 2021.

Go to General and make the change from post-paid to prepaid (Yes instead of No).

Click Save and update the calculation file.

The NPV effect is small, but the payment pattern is changed. We recommend that you review the change by clicking on Change and review the cash flow before and after. The effect on the lease liability can be more significant at a specific date.

16.2.10 Forgot to register the termination of a contract

Company B has a contract that is terminated in September 2020 but not registered as terminated as of the year-end 2020. The error is first detected in February 2021. The company uses the Accounting date function to register the accumulated effect of registering the termination in an incorrect period.

The lease contract was originally registered as illustrated below:

Go to Log other change and set the change date to September 1st 2020, the accounting date to February 1st 2021 and follow the instructions for termination. In this case, we don’t have a termination penalty fee.

Click Save and update the calculation file.

The termination is now registered in February 2021, and the two payments made in October 2020 and January 2021 are corrected (-200.000). The gain and the loss are calculated as the difference between the remaining value of the ROU asset and the lease liability (-1.998).

16.2.11 The termination of a contract is incorrect

In this situation, company C has erroneously registered a contract as terminated in September 2020. This was detected in June 2021, and the company uses the Accounting date function to make the correction.

The contract was registered as illustrated below:

To reverse the termination and calculate the effect in June 2021, make these changes:

The Change date is the same date as the date the termination was originally registered, and the Accounting date is the date that the effect of the error should be calculated. Turn off the termination by answering No instead of Yes to the question, “Is the lease contract terminated?”.

Click Save and update the calculation file.

The termination is reversed in June 2021, the accumulated effect of the non-registered payments in October 2020, January 2021 and April 2021 (300.000) are registered in that period, and the change of the gain or the loss is reversed.

16.2.12 Remove a lease that has incorrectly been registered as an IFRS lease

Company D has registered a contract to rent an accounting system as an IFRS 16 lease contract. After a discussion with the auditor, it’s concluded that the contract is outside the scope of IFRS 16 (Section 3 (e))

The contract has a payment of € 5 000 per month, and the calculation is as follows, from January 1st 2019.

In June 2021, it’s decided to remove the contract and account for the accumulated effect, using Accounting date.

Use Log other change and set the change date to January 1st 2019 (The start date of the lease) and the accounting date to June 1st 2021. Set the payment to 0 instead of € 5 000.

Click Save and update the calculation file.

The correction is calculated in June 2021, zeroing out the ROU asset and the lease liability, and calculating the accumulated effect of terminating the contract.

Please note that after we introduced Accounting date, the previous guidance on how to correct changes is not relevant.