IASB publishes proposed amendment regarding COVID-19-related rent concessions

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Apr 24, 2020

On April 24, 2020, the International Accounting Standards Board (IASB) 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 May 8, 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 IFRS Standards 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 pandemic.


Suggested changes

The changes proposed in ED/2020/2 Covid-19-Related Rent Concessions (Proposed amendment to IFRS 16) would amend IFRS 16 to

  1. provide lessees with an exemption from assessing whether a COVID-19-related rent concession is a lease modification;
  2. require lessees that apply the exemption to account for COVID-19-related rent concessions as if they were not lease modifications;
  3. require lessees that apply the exemption to disclose that fact; and
  4. require lessees to apply the exemption retrospectively in accordance with IAS 8, but not require them to restate prior period figures (a lessee would recognize 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 application).

The proposed amendment would not supersede the educational material recently published on the same topic, but rather the two complement each other.

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.


Comment period

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 April 17, 2020, the Trustees approved a 14-day comment period. Therefore, comments on the proposed changes are requested by May 8, 2020.


Effective date

The Board expects to finalize the amendment to IFRS 16 by the end of May 2020 and proposes an effective date of June 1, 2020 for the final amendment (earlier application permitted, including in financial statements not yet authorized for issue at the date the amendment is issued).


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