The International Accounting Standards Board has issued an amendment to IFRS 16 Leases to make it easier for lessees to account for Covid-19-related rent concessions, such as rent holidays and temporary rent reductions.
The amendment exempts lessees from having to consider individual lease contracts to determine whether rent concessions occurring as a direct consequence of the pandemic are lease modifications. And it allows lessees to account for such rent concessions as if they were not lease modifications. It applies to Covid-19-related rent concessions that reduce lease payments due on or before 30 June 2021.
IFRS 16 specifies how lessees should account for changes in lease payments, including concessions. However, applying those requirements to a potentially large volume of Covid-19-related rent concessions could be practically difficult, especially in the light of the many challenges stakeholders face during the pandemic.
This optional exemption gives timely relief to lessees and enables them to continue providing information about their leases that is useful to investors. The amendment does not affect lessors.
The amendment was effective 1 June 2020, and to ensure the relief is available when needed most lessees can apply the amendment immediately in any financial statements – interim or annual – not yet authorised for issue.
Hans Hoogervorst, chair of the International Accounting Standards Board, said: “The amendment is designed to make it easier for lessees, especially those with a lot of lease contracts, to account for Covid-19-related rent concessions while still providing useful information for investors.”