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 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)”.

On April 24, 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 May 15, 2020, the Board considered the feedback received and decided to finalize the amendment with some changes.

Changes

The changes in Covid-19-Related Rent Concessions (Amendment to IFRS 16) 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.

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 June 1, 2020. Earlier application is permitted, including in financial statements not yet authorized for issue at May 28, 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 June 29, 2020.

Additional information

• IASB press release
• Final amendment
• Proposed Taxonomy Update

Review the updated alignment dashboard prepared for the June 2020 IPSASB meeting on the IPSASB's website.

The amendments to IFRS 17 are being finalized by the staff. During this process the staff identified five (sweep) issues for which the Board decided to make additional changes to the standard, along with two other matters that were identified after the staff paper had been distributed.

Listen to the podcast on the IASB's website.

Below is an analysis of all changes made to the work plan since our last analysis on April 24, 2020.

Standard-setting projects

• no changes

Maintenance projects

• Annual improvements — 2018-2020 cycle — removed from the work plan as the IASB completed this cycle of annual improvements by issuing Annual Improvements to IFRS Standards 2018–2020 on May 14, 2020; projects that were part of this cycle included:
• Fees in the ‘10 per cent’ Test for Derecognition of Financial Liabilities (Amendments to IFRS 9)
• Lease Incentives (Amendment to Illustrative Example 13 accompanying IFRS 16)
• Subsidiary as a First-time Adopter (Amendment to IFRS 1)
• Taxation in Fair Value Measurements (Amendment to IAS 41)
• Classification of liabilities — Effective date — an exposure draft ED/2020/3 Classification of Liabilities as Current or Non-current — Deferral of Effective Date (Proposed amendment to IAS 1) was published on May 4, 2020 with comments requested by June 3, 2020; the feedback on the exposure draft will be discussed in June 2020
• IFRS 16 and COVID-19 — the IASB discussed the feedback on the exposure draft published on April 24, 2020 at its supplementary meeting on May 15, 2020 and expects to issue final amendments "on or around May 28, 2020"
• IAS 37 — Onerous contracts — removed from the work plan as the IASB issued Onerous Contracts — Cost of Fulfilling a Contract (Amendments to IAS 37) on May 14, 2020
• IAS 16 — Proceeds before intended use — removed from the work plan as the IASB issued Property, Plant and Equipment — Proceeds before Intended Use (Amendments to IAS 16) on May 14, 2020
• IFRS 3 — Updating a reference to the Conceptual Framework — removed from the work plan as the IASB issued Reference to the Conceptual Framework (Amendments to IFRS 3) on May 14, 2020

Research projects

• Dynamic risk management — core model outreach has been clarified to take place in fourth quarter of 2020 (previously second half of 2020)

Other projects

• IFRS Taxonomy update — Amendments to IFRS 17 and IAS 16 — a project newly added to the work plan; a proposed taxonomy update is expected in July 2020
• IFRS Taxonomy update — Covid-19-related rent concessions (Amendment to IFRS 16) — a project newly added to the work plan; a proposed taxonomy update is expected in May 2020

The revised IASB work plan is available on the Board's website.

In the IAASB’s ongoing response to COVID-19, guidance related to Going Concern and Subsequent Events have also been issued, and more information can be found on the IAASB’s COVID-19 Webpage.

Review the guidance for auditor reporting on the IAASB's website.

The resource documents relate to:

• Impairment of Long-Lived Assets
• Impairment of Goodwill and Intangible Assets with an Indefinite Life

For investment funds, the blanket relief provides a 60-day extension for certain filing, delivery and prospectus renewal obligations normally required to be made during the period from June 2, 2020 to September 30, 2020.

For non-investment fund issuers, the blanket relief provides a 45-day extension for certain filing, delivery and base shelf prospectus renewal obligations normally due or required to be made during the period from June 2, 2020 to August 31, 2020.

Investment funds and non-investment fund issuers that have already used the prior relief announced on March 23, 2020 to extend any filing, delivery and prospectus renewal deadline occurring on or before June 1, 2020 cannot use this relief to further extend the deadline.

Additionally, to rely on the relief, non-investment fund issuers must issue a news release before the required filing deadline and comply with other conditions. Issuers and their counsel are encouraged to review the respective orders to ensure compliance with these conditions.

Re­view the press re­lease on the CSA's web­site.

The existing contributions standards of NFPOs were established in 1996. While the standards have remained largely unchanged since that time, research suggests the landscape for many NFPOs has evolved.

Re­view the press re­lease and the Consultation Paper on the AcSB's web­site.

The re­source documents relate to:

• Going Concern and Liquidity Risk for Private Enterprises
• Subsequent Events; and
• Debt Modification Accounting.

Providing useful, timely, and accessible information is a key objective of the Board's strategic plan. The new materials, along with other previously posted staff guidance, aim to assist auditors ahead of the implementation of these standards.

Resources that may be useful to auditors as they begin to implement new requirements include:

• Staff Presentation on Auditing Accounting Estimates, Including Fair Value Measurements. This presentation provides an overview of the new standard on auditing estimates and highlights key aspects of the new requirements. 
• Staff Presentation on Auditor's Use of the Work of Specialists. This presentation describes amended requirements for an auditor’s use of the work of a company's specialists as audit evidence and using the work of an auditor's specialist.
• Staff Guide to Accessing Amended Estimates and Specialists Standards. This document is intended to assist auditors and others in navigating the PCAOB's website to access the amended versions of the related PCAOB auditing standards and auditing interpretations. It provides users with an overview of the amended standards, a tutorial on how to navigate to the new standards on the PCAOB website, and links to the implementation pages for Auditing Accounting Estimates, Including Fair Value Measurements and Auditor's Use of the Work of Specialists.
• Staff Guidance on Auditing Accounting Estimates. This publication illustrates relevant considerations for certain key areas of the revised standard, including certain information from the adopting release.
• Staff Guidance on Auditing the Fair Value of Financial Instruments. This publication illustrates relevant considerations for auditing the fair value of financial instruments, especially when pricing information from pricing services, brokers and dealers, and other third party sources is used, including certain information from the adopting release.
• Staff Guidance on Supervising or Using the Work of an Auditor's Specialist. This publication illustrates relevant considerations for the auditor when supervising the work of an auditor-employed specialist or using the work of an auditor-engaged specialist, including certain information from the adopting release.
• Staff Guidance on Using the Work of a Company's Specialist. This publication illustrates relevant considerations for the auditor when evaluating the work of a company's specialist including certain information from the adopting release.