ESMA statement on supervisory coordination on accounting for COVID-19-related rent concessions

21 July 2020

The European Securities and Markets Authority (ESMA) has issued a public statement recommending coordination of supervisory action with regards to issuers’ accounting for COVID-19-related rent concessions.

On 28 May 2020, the International Accounting Standards Board (IASB) published Covid-19-Related Rent Concessions (Amendment to IFRS 16) amending the standard to provide lessees with an exemption from assessing whether a COVID-19-related rent concession is a lease modification. The amendment has not been endorsed for use in the European Union yet, so the relief is not available to European issuers. While the amendment was given positive endorsement advice by both EFRAG and ARC speedily, the European Parliament and the Council of the European Union now have three months to object, which means that final endorsement could be delayed to October 2020, unless Parliament and Council issue no objection notices earlier than that.

ESMA's statement now states that provided that the Parliament and the Council do not object to the endorsement of the amendment, ESMA recommends that National Competent Authorities do not prioritise supervisory actions on the application of the lease modification requirements contained in IFRS 16 as currently endorsed by the EU to COVID-19-related lease modifications which would fall within the scope of the IFRS 16 amendment. This coordination of supervisory actions applies exceptionally for financial periods ending on or before 31 July 2020 and as long as issuers account for those transactions on the basis of the IFRS 16 amendment.

Please click to access the public statement on the ESMA website.