Accruals and deferred income (overlopende passiva)
Income received in advance and costs still to be paid that are allocated to the financial year (transitory items on the liabilities side).
What do accruals and deferred income mean?
Income received in advance and costs still to be paid that are allocated to the financial year (transitory items on the liabilities side).
These obligations arise when costs belong to the reporting year but are paid later, or when amounts received relate to future periods. Assess the underlying performance and the balance sheet date.
How does it work?
art. 2:362(5) DCC prescribes that income and expenses of the financial year are recognised, whether or not they led to receipts or payments. If an expense of the year has not yet been invoiced, an amount still to be paid is set against it. If money has been received for a performance that follows after the balance sheet date, that part stays on the balance sheet until you have delivered.
art. 2:364(4) DCC names accruals and deferred income as a separate item, insofar as they are not shown under liabilities; the Decree on annual accounts formats (Besluit modellen jaarrekening) allows them to be shown independently.
Example
A BV with the calendar year as financial year invoices and receives € 12.000 on 1 October for an annual subscription. On 31 December three of the twelve months have been delivered: 3/12 × € 12.000 = € 3.000 is turnover of the year. The remaining € 9.000 stands as an amount received in advance under accruals and deferred income. The gas and electricity bill for November and December, estimated at € 1.400, has not yet come in; the BV recognises that too. Together € 10.400 stands on the balance sheet.
In the annual accounts
Current liabilities on the balance sheet; limited presentation for micro entities.
Difference from trade payables
The invoice date does not determine the heading. Assess the nature of the obligation: a trade debt belongs under amounts owed to suppliers and trade credit (art. 2:375(1) DCC); costs to be allocated and turnover received in advance may be shown as accruals and deferred income insofar as they are not shown under liabilities (art. 2:364(4) DCC). If an invoice later arrives for costs you had already recognised, book it off against that item and not again as an expense.
Common mistakes
- Taking turnover received in advance entirely as income at once
- Recording an already invoiced trade debt twice
What to watch for
- Go through the bank statements and purchase invoices of the first two months after the balance sheet date for performances from the old year.
- Micro: the rule on prepayments and accrued income and on accruals and deferred income does not apply to other operating costs (art. 2:395a(3) DCC). If the BV therefore does not include them, it states this at the foot of the balance sheet. Period allocation remains in force for turnover, wages and purchases.
- Small entities may show accruals and deferred income and current liabilities in one line (model C); medium-sized and large entities also state the accrual items in the public balance sheet (art. 2:397(5) DCC).
Legal basis and source
art. 2:364(4) and 2:375 DCC
Frequently asked questions
Is turnover received in advance a liability?
Yes, as long as you still have to deliver the performance. The amount goes to turnover only in the period in which you deliver.
Does accrued holiday pay belong to accruals and deferred income?
Yes. What employees have accrued up to the balance sheet date and will be paid later is a charge of the current financial year.
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Preparing Dutch annual accounts?
Your first set of annual accounts is free, for every size class. Create an account and prepare the annual accounts of your Dutch company under Title 9 of Book 2 of the Dutch Civil Code.
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