Leap Day is almost here. Does it matter for your financials?

What does it mean, from a financial perspective, to have 29 days in February instead of 28? A recent Wall Street Journal article provided some interesting insights into this unique calendar phenomenon. I’ve summarized those in this post, including my favorite recommendation: do nothing. ?

The longer February?presents companies with a series of issues to consider as they account for the extra day and report their financials for the period. In many cases, the effects of the quirk in the calendar aren’t sizable enough for companies to bother disclosing them.

But some firms choose to incorporate the additional revenue from leap day into their full-year or quarterly guidance. Theoretically, leap day would produce about 1% of additional sales for a typical quarter ending March 31, because it covers 91 days instead of 90.

Theoretically, leap day would produce about 1% of additional sales for a typical quarter ending March 31.

Here are some things companies will need to watch for in disclosing financial results that cover February:?

Employee benefits:?Companies need to make sure payroll benefits and certain employee pay reflect the extra day. Businesses with a large base of hourly workers could see a jump in expenses from the previous year.

Depreciation and amortization:?Businesses will want to make sure they are booking the correct amount of depreciation and amortization for 29 days instead of 28. For some companies, that may be a manual adjustment, while at others it may be automated, he said.

Comparable metrics:?If companies calculate key data such as same-store sales on a monthly basis and an extra day is material, investors could find it difficult to compare year-over-year sales and need to consider that day.

Interest rates: Certain industries will see greater effects from the added day. Banks and other lenders have to calculate interest rates on a daily basis for 366 days, not 365.

Or…just ignore it:?Retailers have to examine the extra day of sales to see if it is material enough to warrant a footnote saying 2024 might not be comparable to the previous year. When calculating comparable metrics of a leap year versus a non-leap—a percentage change in sales, for instance—companies can omit the extra day in its comparisons and will generally explain it to investors separately if it is deemed material.

Hope that helps! Reach out if you have any questions. ??

Happy leap day!

Kim