7th September 2020
In May 2020, the International Accounting Standards Board (IASB) issued Covid-19-Related Rent Concessions, which amended IFRS 16 Leases.
Rent Concessions: Practical Relief for Lessees
The amendment permits lessees, as a practical expedient, not to assess whether particular rent concessions occurring as a direct consequence of the Covid-19 pandemic are lease modifications and instead to account for those rent concessions as if they are not lease modifications. The amendment does not affect lessors.
Under IFRS 16 Leases, rent concessions often meet the definition of a lease modification and the accounting for lease modifications can be complex, with the need to recalculate lease liabilities using a revised discount rate and adjust the corresponding right-of-use assets.
Practical expedient for Covid-19 related rent concessions: e.g. if the rent concession was in the form of a one-off reduction in rent, then it would be accounted for as a variable lease payment and is recognised in profit or loss.
Read the full white paper HERE
The full white paper includes details of the Scope and Objective of the Amendment as well as giving examples of Accounting for Rent Free Periods (Rent Holidays) and details of changes to contractual changes and conditions.
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