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IFRS 16 and Covid 19 [Completed]

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.

Last updated:

June 2020

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. Com­ments were re­quested by May 8, 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.

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.

 

Other developments

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.

 

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