Modified Retrospective Approach
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Focus on IFRS 16
In the modified retrospective approach there is no restatement of the comparative information. The cumulative effect is recorded as an opening balance adjustment of the non-distributed results (or, if need be, another component of the shareholders’ equity).
Impact on the debt:
The rents debt is determined on the basis of a discounting of the rents outstanding on the date of first-time application.
Impact on the asset:
The valuation of the right of use corresponds to:
- the book value if IFRS 16 was applied on the effective date of the lease, discounted at the lessee’s marginal debt rate on the date of first-time application, or
- the rents debt, adjusted by the prepayments and rents payable relative to the date of first-time application.
Note: Only the second valuation is available in Lease.
Configuration of the transitional provision
Transitional provision of the group
The choice as to the transitional provision is selected in the Standards Management page:
Entry of the date of first-time application (FTA) in the lease
The date of first-time application of IFRS 16 must be entered in the accounting section of the contractual clauses:
Note: Leases that have been restated in IAS 17 are restated in accordance with the full retrospective approach.
Displaying of the modified retrospective approach
Lease proposes a display of the contractual data in a full retrospective approach (original contractual data) or in a modified retrospective approach. For leases that are affected, this display is accessible via the toolbar:
Leases payable in advance
Initial conditions
Lease searches for the first due date affected by the FTA. The first rent is then pro-rated for its share included in the FTA and constitutes the share of the prepayments.
Example:
With an FTA in January 2019 and a quarterly due date of 12/12/2018 for €1,000, [the rent] will be pro-rated according to the basis of amortisation of the debt selected as follows:
Original initial conditions:
Modified initial conditions:
Impact on the contractual payment schedule
Only rents payable after the date of first-time application are discounted. The rent payable that exists on the date of first-time application is then considered a pro rata pre-paid rent.
Original payment schedule:
Modified payment schedule:
Impact on the valuation of the asset
The right of use valuation corresponds to the rents debt adjusted by the prepayment relative to the date of first-time application. The asset will be depreciated over the remaining useful life relative to the FTA.
Original asset valuation:
Modified asset valuation:
Generation of entries
- As at 31/01/2019:
First normative implementation
L-A210 – Gross value |
FE10 |
8,517.23 |
|
L-A486-1 – Pre-payments |
FE10 |
|
777.78 |
L-L161 – Current debt |
FE10 |
|
7, 739.46 |
Restatement of prepaid rent
L-A486-1 – Pre-payments |
FC01 |
344.44 |
|
L-R612 - Rent |
|
|
344.44 |
Reclassification of the non-current debt
L-L160 – Non-current debt |
FE12 |
3,388.92 |
|
L-L161 – Current debt |
FE12 |
|
3,388.92 |
Amortisation/depreciation expenses
L-A280 – Amortisation/depreciation |
CR01 |
|
329.63 |
L-R681 – Amortisation/depreciation expense |
|
329.63 |
|
Leases payable in arrears
Initial conditions
Lease searches for the first due date affected by the FTA. The first rent is included in the FTA in full.
Original initial conditions:
Modified initial conditions:
Impact on the payment schedule
Only the rents due after the date of first-time application are discounted. The rent due that exists on the date of first-time application is therefore considered in full.
Original contractual payment schedule:
Modified payment schedule:
Impact on the valuation of the asset
The valuation of the right of use corresponds to the rents debt less the rent payable prior to the date of first-time application. The asset will be depreciated over the remaining useful life relative to the FTA.
Example:
With an FTA in January 2019 and a quarterly due date 12/03/2019 for €1,000. The pro rata rent excluded from the FTA decreases the valuation of the asset:
Original asset valuation:
Modified asset valuation:
Generation of entries
- As at 31/01/2019:
First normative implementation
L-A210 – Gross value |
FE10 |
7,528.34 |
|
L-L161 – Current debt |
FE10 |
|
7,739.46 |
L-L408-1 – Rent payable |
FE10 |
211.11 |
|
Restatement of the rent
L-R612 – Rent |
|
|
344.44 |
L-R661 – Interest |
|
19.77 |
|
L-L161 – Current debt |
CC03 |
324.67 |
|
Reclassification of the non-current debt
L-L160 – Non-current debt |
FE12 |
4,345.99 |
|
L-L161 – Current debt |
FE12 |
|
4,345.99 |
Amortisation/depreciation expenses
L-A280 – Amortisation/depreciation |
CR01 |
|
328.24 |
L-R681 – Amortisation/depreciation expenses |
|
328.24 |
|
- As at 31/03/2019:
Restatement of rent
L-R612 – Rent |
|
|
550.96 |
L-R661 – Interest |
|
30.18 |
|
L-L161 – Current debt |
CC03 |
520.78 |
|
Restatement of non-current debt
L-L160 – Non-current debt |
FE12 |
330.02 |
|
L-L161 – Current debt |
FE12 |
|
330.02 |
Amortisation/depreciation expenses
L-A280 – Amortisation/depreciation |
CR01 |
|
328.24 |
L-R681 – Amortisation/depreciation expenses |
|
328.24 |
|
Restatement of rent payable at the end of the due date
L-L408-1 – Rent Payable |
FC01 |
|
211.11 |
L-R612 - Rent |
|
211.11 |
|