When it comes to your disclosure requirements, there are two different methodologies that are available to companies when reporting on the Current/Non-Current Lease Liability. In this article we'll detail these two methodologies, which are available in Nomos One, and explain how each method calculates the current and non-current lease liability portions within the Disclosure Report.
Net Present Value
The Net Present Value methodology uses the expected future lease payments occurring within and beyond the next 12 months, and then calculates the present value of those expected future lease payments. This is the default methodology Nomos One applies to an organisation, and is in line with how the overall lease liability is calculated.
Current amount = present value of the lease payments expected within the next 12 months
Non-current amount = present value of the lease payments expected beyond the next 12 months
Lease Liability Movement
This methodology uses the expected future lease payments and expected interest expense to be incurred and calculates the movement in the lease liability within and beyond the next 12 months. This methodology reflects the movement in the lease liability over the life of the lease.
Current amount = future value of the expected lease payments, less incurred interest expense, within the next 12 months. This is also the amount by which the lease liability is expected to reduce/move by in the next 12 months.
Non-current amount = future value of the expected lease payments, less incurred interest expense, beyond the next 12 months. This is also the amount by which the lease liability is expected to reduce/move beyond the next 12 months.
Changing your Current/Non-current Lease Liability reporting method
Once your Disclosure Report is generated, by default you'll see the Current and Non-current showing the Net Present Value of expected future lease payments, but you can choose to change this to display the movement in Lease Liability within these periods if you would like.
Changing between the two options will show differences in your current/non-current based on their fundamental calculation differences. This setting cannot be split across different agreements, asset classes, or entities that are in the same organisation.
Please Note: Only users with the Admin permission can change the Reporting method in the Settings console.
To change your Current/Non-current reporting method:
- Navigate to the Settings Console
- Click on Accounting & Finance
- Scroll to the section titled Current and Non-Current Liability Calculation Method
- Select Lease Liability Movement if you want to change the reporting method from the default method, Net Present Value
- Generate your Disclosure Report and see the impact of the change you've made!
Please note: The reporting method you select will apply to all agreements in your organisation, but you can switch between the methods as much as you would like.
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