The UK’s Financial Reporting Council (FRC) announced Tuesday that it will not take regulatory action against issuers who take advantage, before its adoption by the EU, of the amendment to IFRS 16, Leases, which the International Accounting Standards Board (IASB) set out on 28 May.
The FRC said in a statement: “Should endorsement of the amendment [by the EU] not proceed as expected this position will be reviewed.”
The EU’s adoption of the amendment is expected in the autumn, and EU law applies in the UK during the Brexit transition period, which ends on 31 December.
The IFRS 16 amendment, a direct response to COVID-19, makes it easier for lessees to account for rent concessions such as rent holidays and temporary rent reductions related to the pandemic.
This amendment is effective for annual reporting periods beginning on or after 1 June 2020, but it may also be applied early.
The FRC’s approach applies to both annual and interim accounts.
In addition, the UK’s Financial Conduct Authority (FCA) is following the European Securities and Markets Authority (ESMA) expectation that authorities will not prioritise supervisory actions relating to issuers’ decisions on whether or not to apply the reliefs provided by the amendment.
The FCA said in a statement that the temporary relief to use the amended IFRS 16 rather than the standard as currently adopted by the EU had two conditions for issuers. They must:
- Apply the accounting treatment to those transactions as foreseen in the IFRS 16 amendment.
- Disclose their use of the amendment as issued by the IASB in the notes to the financial statements.
— Oliver Rowe (Oliver.Rowe@aicpa-cima.com) is an FM magazine senior editor.