Scenario
Mentioned below are the details of Lease Accounting Contract
Start date – 8th May 2026
End date – 30th June 2028
Payment start date – 31st May 2026
When the contract date falls in the middle of the month, they need the interest calculation to be based only on the number of days from the lease inception date up to the end of that month. Interest expense for the first period seems to be calculated for the whole month, regardless of the lease inception date.
For the first month, the system is calculating interest expenses for the full month.
We are currently reviewing this matter with our R&D team. During our discussions, it was noted that IFRS 16 recommends the use of the effective interest method to ensure a faithful representation of the time value of money. Based on this, it may be more accurate to consider the lease commencement date and prorate interest for the first month.
However, as this behavior has not been previously reported by other customers, we would like to better understand its practical impact. Specifically, could you please confirm whether the current approach (i.e., applying a full month of interest in the first period) has resulted in:
- Any concerns raised by auditors
- Compliance or regulatory issues
- Financial reporting discrepancies
- Any other business or operational impacts
Your feedback will help us assess the significance of this issue and determine the appropriate course of action.