Leases – Accounting for rent concessions as a result of the COVID-19 pandemic (Further amendments to Section 3065) [Completed]
Effective date: |
The amendments will apply to annual financial statements ending on or after December 31, 2021, with earlier application permitted, including in financial statements not yet authorized for issue. |
Last updated: |
December 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 3065, Leases 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.
In November 2020, the AcSB amended Section 3065, Leases to provide an option for both lessees and lessors to not account for COVID-19-related lease modifications as new leases. The existing relief is limited to lease payments originally due on or before December 31, 2021.
On June 30, 2021, in response to the ongoing effects of the COVID-19 pandemic and the possibility that lessors may grant rent concessions past December 31, 2021, the AcSB issued an Exposure Draft which proposed to extend the optional relief for both lessees and lessors to December 31, 2022. Comments by stakeholders were requested by July 30, 2021.
Following a review of the responses to the Exposure Draft, the AcSB approved the proposed changes to Section 3065 at its meeting on September 15-16, 2021. The required amendments to Section 3065 in Part II of the CPA Canada Handbook – Accounting were made on December 1, 2021.
Other developments
December 2021
On December 1, 2021, the required amendments to Section 3065 were made to Section 3065 in Part II of the CPA Canada Handbook – Accounting.
June 2021
On June 30, 2021, the AcSB released an Exposure Draft that proposes to extend the relief period for both lessees and lessors on accounting for lease modifications received or granted as a result of the COVID-19 pandemic to December 31, 2022. This amendment would also apply to not-for-profit organizations (NFPOs) applying the standards in Part III of the Handbook, as relevant. Comments by stakeholders are requested by July 30, 2021.