Other cases
Note: In Lease, the accounting entry for the split of current debt and non-current debt is netted. Case study 8.2 shows the principle of recognition for debt entries in Lease.
Lease payable in advance + Basis 360 asset and liability + repayment on disbursements
Initial condition
Payment schedule
Debt depreciation
Depreciation of the asset
Accounting entry as at 30.11.2018 (TD - CAS 1)
Debit | Credit | ||
|---|---|---|---|
681010 | Provision for depreciation | 87,950.08 | - |
661001 | Interest | 17,119.94 | - |
613 | Rent | - | 100,000.00 |
164000 | Non-current debt | 256,223.69 | - |
164001 | Current debt | - | 7,583.52 (1) |
281800 | Depreciation | - | 87,950.08 |
486000 | Prepaid expenses | - | 165,760.11 (2) |
(1)The amount of current debt 7,583.52 corresponds to the difference between the amount of non-current debt as at 30.11.2019 which is 256,223.69 and the current debt as at 30.11.2018 which is 248,640.16.
(2)The amount of 165,760.11 in prepaid expenses corresponds to the actual repayment for the period (248,640.16) - amount of cut-off rent (100,000) + amount of cut-off interest expense (17,119.95)
Accounting entry as at 31.12.2018 (TD - CAS 1)
Debit | Credit | ||
|---|---|---|---|
681010 | Provision for depreciation | 87,950.08 | - |
661001 | Interest | 17,119.95 | - |
613 | Rent | - | 100,000.00 |
281800 | Depreciation | - | 87,950.08 |
486000 | Prepaid expenses | 82,880.05 (1) | - |
(1)The amount of 165,760.11 in prepaid expenses corresponds to the amount of cut-off rent (100,000) - Amount of cut-off interest expense (17,119.95)
Accounting entry as at 31.01.2019 (TD - CAS 1)
Debit | Credit | ||
|---|---|---|---|
681010 | Provision for depreciation | 87,950.08 | - |
661001 | Interest | 17,119.95 | - |
613 | Rent | - | 100,000.00 |
281800 | Depreciation | - | 87,950.08 |
486000 | Prepaid expenses | 82,880.05 (1) | - |
(1)The amount of 165,760.11 in prepaid expenses corresponds to the amount of cut-off rent (100,000) - Amount of cut-off interest expense (17,119.95)
Case of Current debt / Non-current debt split
Initial conditions - see CAS 8.1
Debt depreciation
Accounting entry as at 30.09.2018
| Debit | Credit | |
|---|---|---|---|
681010 | Provision for depreciation | 87,950.08 | - |
661001 | Interest | 17,119.94 | - |
613 | Rent | - | 100,000.00 |
164000 | Non-current debt | 256,223.69 (2) | - |
164001 | Current debt | - | 7,583.52 (1) |
281800 | Depreciation | - | 87,950.08 |
486000 | Prepaid expenses | - | 165,760.11 |
Explanation of the debt recognition entry
The amount of current debt 7,583.52 (1) corresponds to the difference between the amount of non- current debt as at 30.11.2019 which is 256,223.69 (2) and the current debt as at 30.11.2018 which is 248,640.16 (3). The amount of 248,640.16 corresponds to the rent restatement accounting entry.
The parts in grey color are not visible in Lease.
Debit | Credit | ||
|---|---|---|---|
681010 | Provision for depreciation | 87,950.08 | - |
281800 | Depreciation | - | 87,950.08 |
613 | Rent | - | 100,000.00 |
661001 | Interest | 17,119.94 | - |
164001 | Current debt as at 30.11.2018 | 248,640.16 (3) |
|
486000 | Prepaid expenses | - | 165,760.11 |
Actual restatement entry
164001 | Current debt as at 30.11.2019 |
| 256,223.69 (2) |
164000 | Non-current debt as at 30.11.2018 | 256,223.69 | - |
Reclassification entry for non-current debt to non-current debt
164001 | Current debt | - | 7,583.52 (1) |
Lease payable in arrears + Basis 360 asset and liability + repayment on disbursements
Initial conditions
The "last day of the month" checkbox is enabled so that the repayment dates are aligned with the actual end-of-month days, rather than the 29th of each month.
Payment schedule
Debt depreciation
Depreciation of the asset
Accounting entry as at 30.09.2018 (TD -CAS 2)
| Debit | Credit | |
|---|---|---|---|
681010 | Provision for depreciation | 87,291.96 | - |
661001 | Interest | 17,119.95 | - |
613 | Rent | - | 100,000.00 |
281800 | Depreciation | - | 87,291.96 |
486000 | Prepaid expenses | 82,880.05 | - |
Accounting entry as at 31.10.2018 (TD - CAS 2)
| Debit | Credit | |
|---|---|---|---|
681010 | Provision for depreciation | 87,291.96 | - |
661001 | Interest | 17,119.95 | - |
613 | Rent | - | 100,000.00 |
281800 | Depreciation | - | 87,291.96 |
486000 | Prepaid expenses | 82,880.05 | - |
Accounting entry as at 30.11.2018 (TD - CAS 2)
| Debit | Credit | |
|---|---|---|---|
681010 | Provision for depreciation | 87,291.96 | - |
661001 | Interest | 17,119.94 | - |
613 | Rent | - | 100,000.00 |
164000 | Non-current debt | 256,223.69 | - |
164001 | Current debt | - | 7,583.52 |
281800 | Depreciation | - | 87,291.96 |
486000 | Prepaid expenses | - | 165,760.11 |
Lease payable in arrears + Interest on rent capital deducted from rent + Basis 360 asset and liabilities + repayment on disbursements
Initial conditions
Payment schedule
Debt depreciation
Depreciation of the asset
Accounting entry as at 30.11.2018 (TD - CAS 1 INTERET DEDUIT)
| Debit | Credit | |
|---|---|---|---|
681010 | Provision for depreciation | 87,950.08 | - |
661001 | Interest | 16,495.08 | - |
613 | Rent | - | 100,000.00 |
164000 | Non-current debt | 258,155.44 | - |
164001 | Current debt | - | 7,640.70 |
281800 | Depreciation | - | 87,950.08 |
486000 | Prepaid expenses | - | 167,009.82 |
Lease with Initial direct costs + Dismantling costs + Prepaid expenses + Lease incentives received
Initial conditions
Payment schedule
Debt depreciation
Depreciation of the asset
Accounting entry as at 31.01.2018 (TD - CAS 1 - CDI+AC)
Debit | Credit | ||
|---|---|---|---|
612060 | Lease incentives received | 150,000.00 | - |
612040 | Initial direct costs | - | 100,000.00 |
681010 | Provision for depreciation | 95,162.33 | - |
661001 | Interest | 23,692.36 | - |
613 | Rent | - | 100,000.00 |
612050 | Prepayments | - | 600,000.00 |
164000 | Non-current debt | - | 8,501,432.29 |
158100 | Costs for dismantling | - | 300,000.00 |
218000 | Right of use | 10,277,531.67 | - |
164001 | Current debt | - | 926,099.38 |
281800 | Depreciation | - | 95,162.33 |
486000 | Prepaid expenses | 76,307.64 | - |
Lease agreement with call option (IAS 17)
Initial conditions
Event: Exercise of the purchase option
Payment schedule
Debt depreciation
Depreciation of the asset
Depreciation of the asset cancelled in the company accounts
Accounting entries as at 28.02.1999 (SEC – CAS 1)
| Debit | Credit | |
|---|---|---|---|
681010 | Provision for depreciation | 1,451.15 | - |
281800 | Depreciation | - | 1,451.15 |
661001 | Interest | 345.97 | - |
613 | Rent | - | 1,720.23 |
486000 | Prepaid expenses | - | 105.71 (1) |
218000 | Right of use | 100,463.90 | - |
164001 | Current debt | - | 18,201.93 |
164000 | Non-current debt | - | 80,782.00 |
(1) The entry generates an account 486000 prepaid expenses due to the accounting method of debt repayment “on disbursement”.
According to the contractual debt repayment schedule:
- Rent = 1,852.25
- Interest = 372.58
- Debt repayment = 1,479.97
According to the debt repayment schedule on the accounting closing date of 28.02.1999:
- Rent: 1,720.23 è 1,852.25 * 26/28 days
- Interest: 345.97 è 372.58 * 26/28 days
- Debt repayment that should have been deducted: 1,720.23 - 345.97 = 1,374.26
The difference between the actual repayment and the repayment that should have been deducted is 105.71. This amount is classified as an advance expense.
Accounting entries as at 29.02.2004 (SEC – CAS 1)
| Debit | Credit | |
|---|---|---|---|
681010 | Provision for depreciation | 185.58 | - |
661001 | Interest | 0.28 | - |
613 | Rent | - | 132.33 |
218000 | Right of use | - | 1,004.64 |
164001 | Current debt | 1,004.64 | - |
281800 | Depreciation | - | 185.58 |
486000 | Prepaid expenses | 132.05 | - |
Contract with a currency different from the lessee’s currency
Initial conditions
The contract currency is USD and the lessor currency is GBP. The lease is displayed and calculated according to a modified retrospective approach.
Payment schedule
Debt depreciation
Asset depreciation
Accounting entry as at 31.01.2018 (TEST CONV – Base CA – TEST)
Conversion rates:
2018.01 | Average rate | Closing rate |
|---|---|---|
Euro | 1.00 | 1.00 |
GBP | 2.10 | 2.20 |
USD | 2.30 | 2.40 |
USD ==> GBP | 0.91 | 0.92 |
In contract currency
| Debit | Credit | |
|---|---|---|---|
681010 | Provision for depreciation | 1,820.64 | - |
661001 | Interest | 173.95 | - |
613 | Rent | - | 1,000.00 |
164000 | Non-current debt | - | 32,690.08 |
218000 | Right of use | 43,695.25 | - |
164001 | Current debt | - | 10,179.12 |
281800 | Depreciation | - | 1,820.64 |
In lessee’s currency
| Debit | Credit | |
|---|---|---|---|
164000 | Non courrent debt | - | 29,965.90 |
164001 | Current debt | - | 9,330.86 |
477000 | Conversion gap | 155.32(1) | - |
681010 | Provision for depreciation | 1,662.32 | - |
661001 | Interest | 158.82 | - |
613 | Rent | - | 913.04 |
218000 | Right of use | 39 895,66 | - |
281800 | Depreciation | - | 1 662,32 |
(1) The amount of translation difference is obtained by the sum between the translation difference on current and non-current debt. The calculation is as follows:
Current Debt x (Closing Rate - Average Rate) + Non-Current Debt x (Closing Rate - Average Rate). Thus, in this case, the amount of the translation difference is equal to:
32 690.08 x (0.92 - 0.91) + 10 179.12 x (0.92 - 0.91) = 118.44 + 36.88 = 155.32
More generally, the calculation principle realized in the tool during the conversion is as follows:
- Debt is converted on the first day of the contract to the conversion rate from the contract currency to the lessee’s currency on that first day of the contract. Then, the debt will be converted as any monetary item, ie the flows will be converted at the exchange rate of the day of the flow or the average rate of the period if small price fluctuations, and the balance of end of period is converted at the closing conversion rate. Thus, the change in the conversion rate from the contract currency to the lessee's currency is reflected, in the case of the debt, by exchange rate differences which are recognized as income in the entity's accounts.
- The right of use is converted on the first day of the contract to the conversion rate of the contract currency into the lessor's currency on the first day of the contract. Then, the value of the lessee's right-of-use asset in currency is frozen. It will not evolve according to the evolution of the conversion rate of the contract currency versus the lessee's currency. The depreciation charge for the Right of Use will be calculated directly from the value in the currency of the lessee. No exchange differences are noted.