The International Accounting Standards Board (IASB) on Thursday issued an amendment to its standard IFRS 16, Leases, to make it easier for lessees to account for rent concessions such as rent holidays and temporary rent reductions occurring as a direct result of the coronavirus pandemic.
The change, which IASB set out for consultation in early May, means that lessees do not have to consider whether these rent concessions in individual lease contracts are modifications. Lessees have the option to account for these concessions as if they were not modifications.
The amendment applies to COVID-19-related rent concessions that reduce lease payments due on or before 30 June 2021.
Hans Hoogervorst, IASB chair, said: “The amendment is designed to make it easier for lessees, especially those with a lot of lease contracts, to account for COVID-19-related rent concessions while still providing useful information for investors.”
The amendment is effective 1 June, but can be applied earlier in interim or annual financial statements not yet authorised for issue.
For more news and reporting on the coronavirus and how management accountants can handle challenges related to the pandemic, visit FM’s coronavirus resources page.
— Oliver Rowe (Oliver.Rowe@aicpa-cima.com) is an FM magazine senior editor.