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Leases – Accounting for rent concessions as a result of the COVID-19 pandemic (Amendments to Section 3065) [Completed]

Effective date:

The amendments are effective for fiscal years ending on or after December 31, 2020. Earlier application is permitted, including in financial statements not yet authorized for issue, so that the relief is available for most COVID-19-related lease modifications received or granted in 2020.

Last updated:

March 2021

Overview

As a result of the COVID-19 pandemic, many enterprises are receiving rent concessions. This includes lease payment deferrals or payment forgiveness, or they are renegotiating lease terms.

Section 3065Leases provides guidance on accounting for changes in the provisions of an existing lease and requires that any such changes be accounted for as a new lease (i.e. a lease modification). This could be onerous for private enterprises with many leases if all rent concessions needed to be accounted for as new leases. Accordingly, the AcSB decided to amend Section 3065 to provide relief for both lessees and lessors on accounting for rent concessions as a result of the COVID-19 pandemic.

On November 1, 2020, the AcSB issued the amendments to Section 3065 in respect of this project to the CPA Canada Handbook – Accounting Part II.  Section 3065 has been amended to provide optional relief for both lessees and lessors on accounting for lease modifications received or granted as a result of the COVID-19 pandemic. For an enterprise that chooses to apply the relief, changes to the provisions of an existing lease would not be accounted for as a new lease if specific conditions are met.

 

Other developments

September 2020

On September 18, 2020, the AcSB released an exposure draft and seeks feedback on its proposals to provide relief for both lessees and lessors on accounting for lease modifications received or granted as a result of the COVID-19 pandemic. These proposals apply to private enterprises and NFPOs applying Parts II and III of the CPA Canada Handbook – Accounting. Comments are requested by October 2, 2020.

 

Correction list for hyphenation

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