Overview

The International Accounting Standards Board (the Board) added a project to its agenda to provide practical relief to lessees in accounting for rent concessions arising as a result of the Covid 19 pandemic.

At the same meeting, the Board tentatively decided to provide lessees with an optional exemption from assessing whether a Covid19 related rent concession is a lease modification and account for those rent concessions as if they were not lease modifications.

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.

On May 28, 2020, the IASB pub­lished Covid-19-Re­lated Rent Con­ces­sions (Amend­ment to IFRS 16) amend­ing the stan­dard to pro­vide lessees with an ex­emp­tion from as­sess­ing whether a COVID-19-re­lated rent con­ces­sion is a lease mod­i­fi­ca­tion.

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.

On May 28, 2020 the Board issued Covid-19-Related Rent Concessions, which amended IFRS 16 Leases. The 2020 amendment permitted lessees, as a practical expedient, not to assess whether particular rent concessions occurring as a direct consequence of the covid-19 pandemic are lease modifications and, instead, to account for those rent concessions as if they were not lease modifications.

Among other conditions, the 2020 amendment permitted lessees to apply the practical expedient only to rent concessions for which any reduction in lease payments affects only payments originally due on or before 30 June 2021. IFRS 16, as amended, does not permit the practical expedient to be applied to a rent concession that reduces lease payments both before and after June 30, 2021.

The Board has now been informed that lessors are providing rent concessions to lessees that reduce lease payments beyond June 30, 2021 but are eligible for the practical expedient in all other respects.

On February 4, 2021, the Board held a supplementary meeting to consider whether to extend the time period over which the practical expedient in paragraph 46A of IFRS 16 Leases is available for use. The Board is now proposing to permit lessees to apply the practical expedient to rent concessions for which any reduction in lease payments affects only payments originally due on or before June 30, 2022, provided the other conditions for applying the practical expedient are satisfied.

On February 11, 2021, the IASB published an exposure draft “Covid-19-Related Rent Concessions beyond June 30, 2021 (Proposed amendment to IFRS 16)”. The Exposure Draft proposes to extend the availability of the practical expedient in paragraph 46A of IFRS 16, so that it applies to rent concessions for which any reduction in lease payments affects only payments originally due on or before June 30, 2022, provided the other conditions for applying the practical expedient are satisfied.

On March 31, 2021 the Board issued Covid-19-Related Rent Concessions beyond 30 June 2021, which amended IFRS 16. The amendment extended the availability of the practical expedient so that it applies to rent concessions for which any reduction in lease payments affects only payments originally due on or before June 30, 2022, provided the other conditions for applying the practical expedient are met.

Other developments

March 2021

On March 31, 2021, the IASB published Covid-19-Related Rent Concessions beyond 30 June 2021 (Amendment to IFRS 16) that extends, by one year, the May 2020 amendment that provides lessees with an exemption from assessing whether a COVID-19-related rent concession is a lease modification.

February 2021

On February 16, 2021, the AcSB issued its exposure draft that corresponds to the IASB’s Exposure Draft on this topic. Comments are requested by February 25, 2021.

On February 11, 2021, the IASB published an exposure draft “Covid-19-Related Rent Concessions beyond June 30, 2021 (Proposed amendment to IFRS 16)” that contains a proposed extension of the May 2020 amendment that provides lessees with an exemption from assessing whether a COVID-19-related rent concession is a lease modification. Comments are requested by February 25, 2021.

July 2020

On July 1, 2020, these amendments to IFRS 16 were included in the CPA Canada Handbook, Accounting Part I. The Basis for Conclusions issued by the IASB in May 2020 that accompany, but are not part of, IFRS 16, were also added as non-authoritative material.

June 2020

On June 12, 2020, the Accounting Standards Board (AcSB) announced that it endorses the amendment that permits lessees not to assess whether particular Covid-19-related rent concessions are lease modifications and, instead, account for those rent concessions as if they were not lease modifications.

May 2020

On May 28, 2020, the IASB published Covid-19-Related Rent Concessions (Amendment to IFRS 16) amending the standard to provide lessees with an exemption from assessing whether a COVID-19-related rent concession is a lease modification. Concurrently, the IASB also published a proposed Taxonomy Update to reflect this amendment.

April 2020

On April 24, 2020, the Accounting Standards Board (AcSB) issued its exposure draft that corresponds to the IASB’s Exposure Draft on this topic. Comments are requested by May 8, 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.

On April 17, 2020, IASB staff updated the Work Plan to indicate that the Board plans to issue an Exposure Draft in April 2020.