Where does next year's loan repayment go?

The short answer

Under current liabilities or the required maturity information, depending on the model. Split the loan based on the remaining term.

Basis: art. 2:375, 2:395a and 2:396 DCC

Which part do you repay within a year?

A loan that originally ran for five years is not fully non-current at each following balance sheet date. The part that must be repaid within the coming year needs separate attention. The precise presentation depends on the annual accounts model used and on the size class. Base the classification on the current arrangements, not on the original account name.

Take the loan agreement and the repayment schedule. Suppose € 100.000 is outstanding at the balance sheet date and € 20.000 is contractually repaid in the next twelve months. Then it must be visible which part has to be paid in the short term and which part falls due later, in line with the applicable presentation requirements. Interest is a separate component and should not slip unnoticed into the repayment sum. Check payments just before and after the balance sheet date for their actual period. A bank statement of the remaining debt helps, but does not always contain all the information on terms, security or repayability on demand.

How do you present remaining terms?

Art. 2:375 DCC contains rules on liabilities, terms and repayments. For micro and small entities, simplifications apply under art. 2:395a and 2:396 DCC. Those simplifications do not make a correct distinction between payment obligations superfluous. A heavily abridged balance sheet can combine amounts while the underlying breakdown is still needed for the assessment. Therefore keep, per loan, the principal, the remainder, the repayment, interest and end date. Make sure the sum of the breakdown reconciles with the ledger and the annual accounts. A combined publication item must not hide an unexplained difference.

Examine whether the normal repayment calendar still applies. A breached financing condition can affect repayability on demand. An oral expectation that the bank will extend is not the same as a recorded agreement. Have the meaning of a waiver, refinancing or subordination assessed when it determines the classification. Also look at the date on which arrangements came about. Changes after the balance sheet date may call for different reporting treatment than arrangements that already applied at the balance sheet date. So do not adopt a standard classification from the software without checking the current contracts.

When does the repayment schedule change?

Also use the breakdown for your liquidity planning. Favourable solvency says little about affordability when a large final instalment falls due soon. Discuss in good time whether enough cash is available or financing must be renewed. Place any uncertainties alongside the going-concern assessment. Correct the classification in the reporting file and, where necessary, in the bookkeeping so that the next financial year starts with understandable opening balances. Then check that the total debt does not change through the reclassification. The aim is insight into the timing of payments, not making a loan disappear from the balance sheet.

Sources

• KVK: what do the annual accounts consist of?
• Dutch Tax Administration (Belastingdienst): setting up bookkeeping records

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