MGI Worldwide with CPAAI's Global IFRS Specialist Group gives a brief overview on Covid 19, Lease Accounting and Rent Concessions
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.
About our Global IFRS Specialist Group
Our Global IFRS specialists have the benefit of continuing day-to-day experience in IFRS. This means that we can bring practical knowledge to IFRS questions raised and help to apply the sometimes complexregulations in a way that minimises the risk of audit adjustments or the detection of accounting errors by national regulators.
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To learn more about the activities of the Global IFRS Specialist Group, or any of the other Groups, please contact International Business Development Manager, Nicki Lynn [email protected]
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