19.11 Note disclosures

This is an example of a minimum note disclosure for 2019 and going forward (ROU asset specification included) after IFRS 16, which can be included on a stand-alone basis or implemented in other footnotes.

Please note that unfinished verbal descriptions need to be completed individually.

Choose the period to disclose by using the Lookup periods:

Choose the range for the maturity analysis for debt here:

Enter a percentage in the cell behind Discount rate adj. for sensitivity analysis.

It’s also possible to add filters (Please read chapter 18.3.6 for detailed instructions on setting up Search filters)

and currency

(The date of the currency is set in the Menu).

Short term and low asset value leases must be manually corrected, based on the information in the accounting system, for leases that are not separately registered in SharePoint. Short term and low asset value leases don’t include any interest of depreciation in the menu. It’s only the payment that is disclosed, and the information is used for disclosure purposes.

Please note that expenses to short term and low asset leases is an ongoing reporting requirement, according to IFRS 16.

19.11.1 Critical judgment and accounting estimates

In accordance with IAS 1, an entity must disclose information about assumptions it makes about future, as well as other major sources of estimation uncertainty, at the end of the reporting period (IAS 1.125).

In the footnote disclosure, you can locate the information about the effect of options to extend “Not yet committed to” and “Effect of the change of interest rate”. This is helpful in terms of concluding what’s not significant and in terms of disclosing information you deem significant.

The following calculations are made:

Options to extend not yet committed to, discounted liability effect.

This provides the discounted effect of all options that are registered but not yet committed to. By registering all options to extend, you are remined of the options on the front page, as well as having them included in the disclosure.

The effect of not yet having committed to the options to extend is calculated as the discounted cash flow of the instalments in the option period, discounted from the perspective of what it would have been at the end of the option period. For example, if the lease initially ends in December 2020 and has an unused option to extend by two years, then (For the 2019 note disclosures) the two years of additional cash flow will be calculated as being discounted by the entirety of 2020. In this case the effect will be:

where is the rent for the i‘th month from the start of the option period, and r is the monthly discount rate. The general formula is:

where m is the number of months from the note disclosure date to the start of the option period, and N is the total number of months in the option period.

For Excluding options to extend committed to but not yet started, discounted liability effect it’s the same logic but in reverse. Instead of calculating the liability effect of an unused option, we calculate the liability effect of all periods, marked as extension options that has not yet started, at the end of the note disclosure lookup. This will be a negative result.

Options to terminate not yet committed to, discounted liability effect and Excluding options to terminate committed to but not yet occurred, discounted liability effect are all calculated in the same way. In these cases, it’s the discounted liability effect of either exercising an unused termination option or removing one that’s included. This is only applicable for future termination options, i.e. terminations that occur after the end of the note disclosure dates.

Effect on lease liabilities if the discount rate increases/ decreases by 1 %

This calculates the effect of increase and decrease of the discount rate for all leases with a chosen change in the discount rate. It doesn’t include the option to extend not yet committed to or other judgemental options that are not included in the lease liability. The NPV of the option to extend not yet committed to is calculated using the discount rate registered on the contract.

The change in discount rate can be set to a different percentage in Discount rate adj.,

and you’re free to use any filter you want in order to review the effect of a certain category of lease liabilities.

The effect is calculated as the change in discounted cashflow by adding and subtracting the requested percentage from the yearly discount rate. If R denotes the yearly discount rate and r the monthly discount rate, they are related as . We use this equation to calculate (The resulting monthly discount rate after an increase of the yearly discount rate) and (The monthly discount rate after a decrease),

where p is the adjustment percentage. When has been determined, the effect is calculated as:

In this equation, is the rent due at the i‘th month after the note disclosure period, and N is the total number of months remaining of the lease.

Below is an example with a filter set on discount rate category and the discount rate adjustment set to 0.5%.

Other information

This provides additional information.

Estimated residual value guarantees included in the maturity analysis

This is simply the undiscounted estimated residual value guarantees included in the cash flow in the maturity analysis section.

Purchase options included in the maturity analysis

This is the undiscounted purchase price for leases with purchase options included in the cash flow of the maturity analysis section.

The weighted average lessee’s incremental borrowing rate applied to lease liabilities recognized in the statement of financial position at the date of initial application

This is the discount rate averaged over all leases, or the ones present after a filter has been applied, weighted by the lease’s remaining liability at the end of the note disclosure period. This is calculated with the following formula

where is the weighted discount rate, the sum is over all leases, is the discount rate for lease i, and is the remaining liability for lease i.