IASB proposes extending the practical relief regarding COVID-19-related rent concessions
11 February 2021
The International Accounting Standards Board (IASB) has published an exposure
draft 'Covid-19-Related Rent Concessions beyond 30 June 2021 (Proposed amendment
to IFRS 16)' that contains a proposed extension of the May 2020 amendment that
provides lessees with an exemption from assessing whether a COVID-19-related
rent concession is a lease modification. Comments are requested by 25 February
2021.
Background
In May 2020, the IASB issued Covid-19-Related Rent Concessions (Amendment to IFRS
16). The pronouncement amended IFRS
16
Leases to provide lessees with an exemption from assessing whether a
COVID-19-related rent concession is a lease modification. On issuance, the
practical expedient was limited to rent concessions for which any reduction in
lease payments affects only payments originally due on or before 30 June
2021.
Since lessors continue to grant COVID-19-related rent concessions to lessees and
since the effects of the COVID-19 pandemic are ongoing and significant, the IASB
is now proposing to extend the time period over which the practical expedient is
available for use.
Suggested changes
The changes proposed in ED/2021/2 Covid-19-Related Rent
Concessions beyond 30 June 2021 (Proposed amendment to IFRS 16) would amend
IFRS 16 to
- (1)permit a lessee to apply the practical expedient regarding COVID-19-related rent concessions to rent concessions for which any reduction in lease payments affects only payments originally due on or before 30 June 2022 (rather than only payments originally due on or before 30 June 2021);
- (2)require a lessee applying the amendment to do so for annual reporting periods beginning on or after 1 April 2021;
- (3)require a lessee applying the amendment to do so retrospectively, recognising the cumulative effect of initially applying the amendment as an adjustment to the opening balance of retained earnings (or other component of equity, as appropriate) at the beginning of the annual reporting period in which the lessee first applies the amendment; and
- (4)specify that, in the reporting period in which a lessee first applies the amendment, a lessee is not required to disclose the information required by paragraph 28(f) of IAS 8.
Comment period
The IFRS Foundation's Due Process Handbook sets out that 75% of the Trustees must
approve comment periods shorter than 30 days. The Trustees approved a 14-day comment
period. Therefore, comments on the proposed changes are requested by 25 February
2021.
Effective date
The Board expects to finalise the amendment by the end of March 2021 and proposes an
effective date of 1 April 2021 for the final amendment (earlier application
permitted, including in financial statements not yet authorised for issue at the
date the amendment is issued).
Alternative view
The exposure draft includes an alternative view by Board member Nick Anderson. Mr
Anderson voted against publication of the exposure draft noting that when the
practical expedient was initially offered, its application was limited to a very
specific timeframe. Extending the period during which the practical expedient is
available would further impede comparability between lessees that apply the
practical expedient and those that do not.
Additional information
Please click for:
- IASB press release (link to IASB website)
- Access to the exposure draft on the IASB website
- EFRAG's draft comment letter which expresses the support for the amendments. Comments on the EFRAG's comment letter are due by 22 February 2021.
- Deloitte's IFRS in Focus newsletter
- Our IAS Plus project page on IFRS 16 and COVID-19 — Extension of practical expedient