The International Accounting Standards Board (IASB) has issued an amendments to IFRS 16 Leases to make it easier for lessees to account for Covid-19-related rent concessions such as rent holidays and temporary rent reductions
The amendments to IFRS 16 Leases exempts lessees from having to consider individual lease contracts to determine whether rent concessions occurring as a direct consequence of the Covid-19 pandemic are lease modifications, and allows lessees to account for such rent concessions as if they were not lease modifications.
It applies to Covid-19-related rent concessions that reduce lease payments due on or before 30 June 2021.
IFRS 16 specifies how lessees should account for changes in lease payments, including concessions. However, IASB said applying those requirements to a potentially large volume of Covid-19-related rent concessions could be practically difficult, especially in the light of the many challenges companies face during the pandemic.
The exemption is intended to provide support for lessees and enables them to continue providing information about their leases that is useful to investors. The amendment does not affect lessors.
The amendments to IFRS 16 Leases is effective 1 June 2020 but, to ensure the relief is available when needed most, lessees can apply the amendment immediately in any financial statements—interim or annual—not yet authorised for issue.
Hans Hoogervorst, IASB chair, said: ‘The amendment is designed to make it easier for lessees, especially those with a lot of lease contracts, to account for Covid-19-related rent concessions while still providing useful information for investors.’
IASB is also consulting on proposals to update the IFRS Taxonomy to reflect the disclosure requirement included in this amendment. The deadline for comments on this is 29 June.
Source: Accountancy Daily