IASB proposes extending the practical relief regarding COVID-19-related rent concessions

  • IASB document (blue) Image

11 Feb, 2021

The International Accounting Standards Board (IASB) has published an exposure draft 'Covid-19-Related Rent Concessions beyond 30 June 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 25 February 2021.

 

Background

In May 2020, the IASB issued Covid-19-Related Rent Concessions (Amendment to IFRS 16). The pronouncement amended IFRS 16 Leases to provide lessees with an exemption from assessing whether a COVID-19-related rent concession is a lease modification. On issuance, the practical expedient was limited to rent concessions for which any reduction in lease payments affects only payments originally due on or before 30 June 2021.

Since lessors continue to grant COVID-19-related rent concessions to lessees and since the effects of the COVID-19 pandemic are ongoing and significant, the IASB is now proposing to extend the time period over which the practical expedient is available for use.

 

Suggested changes

The changes proposed in ED/2021/2 Covid-19-Related Rent Concessions beyond 30 June 2021 (Proposed amendment to IFRS 16) would amend IFRS 16 to

  1. permit a lessee to apply the practical expedient regarding COVID-19-related rent concessions to rent concessions for which any reduction in lease payments affects only payments originally due on or before 30 June 2022 (rather than only payments originally due on or before 30 June 2021);
  2. require a lessee applying the amendment to do so for annual reporting periods beginning on or after 1 April 2021;
  3. require a lessee applying the amendment to do so retrospectively, recognising the cumulative effect of initially applying the amendment as an adjustment to the opening balance of retained earnings (or other component of equity, as appropriate) at the beginning of the annual reporting period in which the lessee first applies the amendment; and
  4. specify that, in the reporting period in which a lessee first applies the amendment, a lessee is not required to disclose the information required by paragraph 28(f) of IAS 8.

 

Comment period

The IFRS Foundation's Due Process Handbook sets out that 75% of the Trustees must approve comment periods shorter than 30 days. The Trustees approved a 14-day comment period. Therefore, comments on the proposed changes are requested by 25 February 2021.

 

Effective date

The Board expects to finalise the amendment by the end of March 2021 and proposes an effective date of 1 April 2021 for the final amendment (earlier application permitted, including in financial statements not yet authorised for issue at the date the amendment is issued).

 

Alternative view

The exposure draft includes an alternative view by Board member Nick Anderson. Mr Anderson voted against publication of the exposure draft noting that when the practical expedient was initially offered, its application was limited to a very specific timeframe. Extending the period during which the practical expedient is available would further impede comparability between lessees that apply the practical expedient and those that do not.

 

Additional information

Please click for:

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.