IASB consults on proposed amendment to IFRS 16, Leases, during COVID-19
By Anne Adrain, Head of Sustainability and Reporting
30 April 2020
The IASB has issued an Exposure Draft on a proposed amendment to IFRS 16, Leases during COVID-19.
The International Accounting Standards Board (Board) is proposing an amendment to IFRS 16, Leases, to make it easier for lessees to account for rent concessions such as rent holidays and temporary rent reductions during COVID-19.
The Exposure Draft is open for public comment until 8 May 2020.
The objective of the amendment is to give timely relief to lessees when applying IFRS 16 to rent concessions related to COVID-19 while still enabling them to provide useful information about their leases to investors.
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. The Standard requires lessees to assess individual lease contracts to determine whether the concessions are to be considered lease modifications and, if that is the case, the lessee must remeasure the lease liability using a revised discount rate.
The proposed amendment would exempt lessees from having to consider whether particular rent concessions granted during COVID-19 are lease modifications, allowing them to account for these changes as if they were not lease modifications. The amendment would apply such rent concessions that reduce lease payments due in 2020.
The Board has responded quickly to provide support to stakeholders at this difficult time. Accordingly, the comment period of 14 days is short to enable the Board to meet their aim of issuing the final amendment, which would be available to lessees immediately, in May 2020.
The proposed amendment complements the educational materials on IFRS 16 and COVID-19 published on 10 April 2020.