Background

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 amendments introduced explicit requirements for accounting for temporary rent concessions for operating leases occurring as a direct consequence of COVID-19.

Amendments were made 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 on a systematic basis over the periods that the change in lease payments is intended to compensate.  The requirements in the October amendments only apply 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. A similar amendment was made to FRS 105.

FRED 78 proposed that the requirements originally introduced into FRS 102 and FRS 105 in October 2020 were extended to apply to rent concessions that reduce only lease payments originally due on or before 30 June 2022 provided the other conditions for applying the requirements are met.
 
The FRC considers that, as pandemic restrictions continue, extending the existing time condition by 12 months is necessary to ensure these concessions are accounted for consistently and in a way that best reflects their substance. These changes would apply both to FRS 102 and FRS 105 reporters.

FRED 78 was issued in April 2021.

Status of the project

In June 2021, the FRC issued Amendments to FRS 102 and FRS 105 – COVID-19-related rent concessions beyond 30 June 2021.  The amendments are effective for accounting periods beginning on or after 1 January 2021, with early application permitted.