It’s a quadrennial issue for chief financial officers, The Wall Street Journal reported: accounting for leap day, Feb. 29, as they report their financials for the period.

In recent weeks, finance executives at big companies have told investors and analysts that leap day will be reflected, one way or another, in their financials this quarter. Some publicly traded companies have explained on recent earnings calls the expected effects of the extra day. In some cases, the effects may not be sizable enough for companies to disclose them.

Among the issues that CFOs may need to consider as they report their results that include February is employee benefits. Companies need to make sure payroll benefits and certain employee pay reflect the extra day. One banking firm projected that its first-quarter salary and benefits expense will increase with the leap-year day. Businesses with a large pool of hourly workers could see an increase in expenses from the previous year.

Another issue is depreciation and amortization, as businesses will want to make sure they are booking the correct amount of depreciation and amortization for 29 days instead of 28, said Steve Hills, head of the accounting and reporting practice at advisory firm Stout Risius Ross, in an interview with the Journal.

Comparable metrics could also be an issue. If companies calculate key data such as same-store sales on a monthly basis and an extra day is material, then investors could find it difficult to compare year-over-year sales and may need to consider that day, accounting consultant Olga Usvyatsky told the Journal.

Certain industries, such as bankers and other lenders,  will see greater effects from the added day, according to the Journal, as they have to calculate interest rates on a daily basis for 366 days, not 365.

Some finance chiefs may simply opt to ignore the calendar quirk. Companies can omit the extra day in their comparisons to the previous year and can explain to investors if it is deemed material.

Large U.S. companies seldom mention the effect of a leap day in financial reports; only 12 companies in the S&P 500 did so in 2020, said Matthew Glendening, associate accounting professor at the University of Missouri, in an interview with the Journal, citing disclosure rates based on Calcbench data.

“While materiality thresholds are often left to managers’ discretion, disclosure would be more warranted for firms with such greater percentages for the effect of leap-day sales on year-over-year quarterly sales increases for the quarter,” he said. 

But the extra day could matter to certain companies that rely on rental income, such as real-estate investment trusts or car rental companies, the Journal reported.  They could see an increase in income.

Companies’ auditors have to pay attention to this extra day. They will have to make adjustments to their analytics to make sure they aren’t missing any meaningful fluctuations in profits or losses, according to Hills.