Accruals and deferrals (transitorische posten)

What do transitorische posten mean?

Transitorische posten are accrued and deferred amounts with which income and expenses are allocated to the right financial year. They can appear on both sides of the balance sheet.

Prepaid costs are usually on the assets side; costs still to be paid on the liabilities side. The underlying performance determines the cut-off.

How does it work?

Transitorische posten bridge the difference between the moment of payment and the year to which an income or expense belongs. The basic rule is art. 2:362(5) DCC: income and expenses are recognised regardless of whether they led to receipts or payments in the financial year. The balance sheet shows them as overlopende activa or passiva (prepayments or accruals) (art. 2:364(3) and (4) DCC), unless they have already been stated under receivables or liabilities.

There are four variants. Prepaid costs and income still to be received are on the assets side; income received in advance and costs still to be paid on the liabilities side. Income and expenses that must be allocated to another financial year are explained by nature and size (art. 2:377(7) DCC).

Example

A BV pays € 12,000 insurance premium for twelve months on 1 October and books it as a cost. At 31 December nine twelfths is not yet used up: 9/12 × 12,000 = € 9,000 moves from costs to prepayments, so € 3,000 of cost remains. It also has a loan of € 60,000 at 5%, of which the interest is paid in arrears on 31 March. For October through December 60,000 × 5% × 3/12 = € 750 is owed but not paid: interest expense € 750 to accruals. The result therefore falls not by € 12,000 but by € 3,750.

In the annual accounts

Prepayments or accruals on the balance sheet; costs and income in the P&L.

Difference from anticipation items

In the strict doctrine, transitorische posten are amounts already paid or received but belonging to a later period: paid in advance and received in advance. Anticipation items (anticipatieposten) are the mirror image: the income or expense belongs to this year, the money comes later, such as the interest still to be paid in the example. In everyday usage both together are called transitoria.

Common mistakes

• Taking the cash date as the period
• Netting asset and liability items

What to watch for

• At each balance sheet date, make a list of contracts that straddle the year boundary: insurance, rent, licences and interest.
• For micro entities the rule on accruals does not apply to other operating costs; if they are therefore not on the balance sheet, the entity states this below it (art. 2:395a(3) DCC). Small, medium-sized and large entities do not have that exception.
• Reverse the item in the new year before the first invoice is processed, otherwise the cost is counted twice.

Legal basis and sources

art. 2:362(5) and 2:364(3) and (4) DCC

• Dutch Civil Code, Book 2, article 362
• Dutch Civil Code, Book 2, article 364

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