IFRS – IASB introduces relief for rent concessions

On May 28, 2020, the International Accounting Standards Board (IASB) published COVID 19 – Related Rent Concessions (Amendment to IFRS 16) (hereafter “the Amendment’’).

The Amendment adds a practical expedient to IFRS 16 Leases which provides relief for lessees in assessing whether specific COVID-19 rent concessions are lease modifications. Instead, if this practical expedient is applied, these rent concessions are treated as if they are not lease modifications. There are no changes for the lessors.

The COVID-19 pandemic is creating additional burden on entities all over the world. As a result, lessors may have provided or will be providing lessees with rent concessions. These can be in the form of rent holidays or rent reductions for an agreed timeframe (possibly followed by increased rentals in future periods).

In some jurisdictions, governments are making rent concessions a requirement, in others, they are merely encouraging them. However, they will have major impact for lessees, in particular, in the retail and hospitality industries where, in many cases, they have been forced to temporarily close their premises.