IASB will propose to extend practical relief on rent concessions
04 February 2021
In a supplementary meeting held earlier today, the IASB discussed extending the
practical relief in IFRS 16, which permits lessees not to assess whether
particular rent concessions occurring as a direct consequence of the COVID-19
pandemic are lease modifications and, instead, to account for those rent
concessions as if they were not lease modifications.
Among other conditions, the 2020
amendments to IFRS 16 permits a lessee to apply the practical
expedient only to rent concessions for which any reduction in lease payments affects
only payments originally due on or before 30 June 2021. Stakeholders have pointed
out, however, that the ongoing significance and protracted effects of the pandemic
were not envisaged at the time the Board developed the practical expedient, as in
many jurisdictions the ongoing effects of the pandemic are at least as significant
now as they were in May 2020.
The IASB followed this line of argument and decided to propose to extend the relief
to reductions in lease payments originally due on or before 30 June 2022 (with one
Board member dissenting). The exposure draft to be published will propose
retrospective application, which means that a lessee who has applied the initial
expedient might possibly be required to reverse lease modification accounting for
rent concessions that did not qualify because of the original time limit.
Given the urgency of the matter and with permission of the Trustees, the exposure
draft will have a 14-day comment period. Final amendments are expected by the end of
March 2021.