FRED 76 Draft amendments to FRS 102 and FRS 105 - COVID-19-related rent concessions


As a result of the COVID-19 pandemic, many lessees have been granted rent concessions. These concessions differ in nature and depend on the arrangements agreed between the lessee and lessor. Some arrangements involve a temporary reduction in rental payments while others take the form of a rental holiday. FRS 102 and FRS 105 did not contain explicit guidance on accounting for such arrangements.

FRED 76 proposed to introduce explicit requirements for accounting for temporary rent concessions for operating leases occurring as a direct consequence of the COVID-19 pandemic.  The FRED proposed amendments to Section 20 Leases of FRS 102 to require entities to recognise changes in operating lease payments that arise from COVID-19-related rent concessions over the periods that the change in lease payments is intended to compensate.  The FRC considers that this would best reflect the economic substance of the benefit of these concessions and their temporary nature and improve the consistency of reporting for users of financial statements. The proposed amendments are restricted to temporary rent concessions occurring as a direct consequence of the COVID-19 pandemic, when any reduction in lease payments affects only payments originally due on or before 30 June 2021.  These changes would apply both to FRS 102 and FRS 105 reporters.

Status of the project

In October 2020 the FRC issued Amendments to FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland and FRS 105 The Financial Reporting Standard applicable to the Micro-entities Regime - COVID-19-related rent concessions.  The effective date for these amendments is accounting periods beginning on or after 1 January 2020, with early application permitted.

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