ICAS responds to IASB proposed amendment to IFRS 16, Leases, during COVID-19
We highlight the main points in the ICAS response to the IASB proposed amendment to IFRS 16, Leases, during COVID-19.
ICAS has responded to the International Accounting Standards Board (IASB) Exposure Draft on a proposed amendment to IFRS 16, Leases, during COVID-19. Our response commends the IASB for their swift response in tackling this issue during this exceptional time.
The ICAS response is supportive of the proposed amendment which introduces a practical expedient to allow the lessee to elect not to assess whether a COVID-19-related rent concession is a lease modification. We believe that this is a sensible amendment that will provide some practical relief to preparers undertaking the measurement of lease liabilities during this period of uncertainty. Many preparers may have only recently completed the measurement of lease liabilities on first-time adoption of IFRS 16 and will have many other issues to consider in relation to COVID-19, therefore this proposal is welcomed.
We recognise the need for some restrictions around the time period to which the relief would apply. While we are supportive of the introduction of the practical expedient, we believe that the relief should be extended to include lease concessions agreed in 2020, limited to the duration of the pandemic, regardless of when the payments that relate to the concessions fall due.
ICAS also supports the effective implementation of the proposed amendment, effective for accounting periods commencing on or after 1 June 2020. We also welcome the option of early adoption of the proposed amendment, which will enable entities whose reporting year end falls before this date to incorporate these changes into their accounts.
The ICAS response is supportive of the accounting treatment of the proposed amendment which would be applied retrospectively, recognising the cumulative effect of initially applying the amendment as an adjustment to the opening balance of retained earnings (or other component of equity, as appropriate) at the beginning of the annual reporting period in which the lessee first applies the amendment.