IASB finalises amendment to IFRS 16 regarding COVID-19-related rent concessions
28 May 2020
The International Accounting Standards Board (IASB) has 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. Concurrently, the IASB also published a
proposed Taxonomy Update to reflect this amendment.
Background
The COVID-19 pandemic has led to some lessors providing relief to lessees by
deferring or relieving them of amounts that would otherwise be payable. In some
cases, this is through negotiation between the parties, but can be as a consequence
of a government encouraging or requiring that the relief be provided. Such relief is
taking place in many jurisdictions in which entities that apply IFRSs operate.
When there is a change in lease payments, the accounting consequences will depend on
whether that change meets the definition of a lease modification, which IFRS 16
Leases defines as “a change in the scope of a lease, or the consideration
for a lease, that was not part of the original terms and conditions of the lease
(for example, adding or terminating the right to use one or more underlying assets,
or extending or shortening the contractual lease term)”.
On 24 April 2020, the Board published an exposure draft with a
proposed amendment intended to provide practical relief to lessees in accounting for
rent concessions arising as a result of the COVID-19 pandemic. Given the urgency of
the matter, the exposure draft was published with a 14-day comment period. On
15
May 2020, the Board considered the feedback received and decided
to finalise the amendment with some changes.
Changes
The changes in Covid-19-Related Rent Concessions (Amendment to IFRS 16) amend
IFRS 16 to
- (a)provide lessees with an exemption from assessing whether a COVID-19-related rent concession is a lease modification;
- (b)require lessees that apply the exemption to account for COVID-19-related rent concessions as if they were not lease modifications;
- (c)require lessees that apply the exemption to disclose that fact; and
- (d)require lessees to apply the exemption retrospectively in accordance with IAS 8, but not require them to restate prior period figures.
The main change from the proposal in the exposure draft is that the IASB had proposed
that the practical expedient should only be available for lease payments originally
due in 2020. However, after having considered the feedback to the exposure draft,
the IASB decided to extend this period to June 2021 to also capture rent concessions
granted now and lasting for 12 months.
The IASB considered but decided not to provide any additional relief for lessors as
the current situation is not as equally challenging for them and the required
accounting is not as complicated.
Effective date
The amendment is effective for annual reporting periods beginning on or after 1 June
2020. Earlier application is permitted, including in financial statements not yet
authorised for issue at 28 May 2020. The amendment is also available for interim
reports.
Proposed Taxonomy Update
The IASB has also published a proposed Taxonomy Update to reflect the amendment to
IFRS 16. Comments on the proposed Taxonomy update are requested by 29 June 2020.
Additional information
Please click for:
- IASB press release (link to IASB website)
- Access to the final amendment (freely available on the IASB website as part of the COVID-19 response)
- The IAS Plus project page on IFRS 16 and COVID-19
- Access to the proposed Taxonomy Update on the IASB website