The International Accounting Standards Board (IASB) has published an exposure draft
Covid-19-Related Rent Concessions (Proposed amendment to IFRS 16) that
contains a proposed amendment that would provide lessees with an exemption from
assessing whether a COVID-19-related rent concession is a lease modification.
Comments are requested by 8 May 2020.
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)”.
The proposed amendment published today are intended to provide practical relief to
lessees in accounting for rent concessions arising as a result of the COVID-19
The changes proposed in ED/2020/2 Covid-19-Related Rent Concessions (Proposed
amendment to IFRS 16) would amend IFRS 16 to
provide lessees with an exemption from assessing whether a COVID-19-related
rent concession is a lease modification;
require lessees that apply the exemption to account for COVID-19-related
rent concessions as if they were not lease modifications;
require lessees that apply the exemption to disclose that fact; and
require lessees to apply the exemption retrospectively in accordance with
IAS 8, but not require them to restate prior period figures (a lessee would
recognise any difference arising on initial application of the amendment in
opening retained earnings (or other component of equity, as appropriate) in
the annual reporting period that includes the date of initial
The IASB is not proposing any additional relief for lessors as the current situation
is not as equally challenging for lessors, as most have operating leases and even if
they have lease modifications, the required accounting is not as complicated.
The IFRS Foundation's Due Process Handbook sets out that 75% of the Trustees must
approve comment periods shorter than 30 days. In a phone meeting on 17 April 2020,
the Trustees approved a 14-day comment period. Therefore, comments on the proposed
changes are requested by 8 May 2020.
The Board expects to finalise the amendment to IFRS 16 by the end of May 2020 and
proposes an effective date of 1 June 2020 for the final amendment (earlier
application permitted, including in financial statements not yet authorised for
issue at the date the amendment is issued).