Rent concessions include, for instance, rent holidays, and temporary rent reductions – a reality following the advent of COVID-19.
A simplification is now available to IFRS preparers accounting for COVID-19-related rent concessions given that a number of criteria are met:
Criteria 1: The change in lease payments results in revised consideration for the lease that is substantially the same as, or less than, the consideration for the lease immediately preceding the change.
Criteria 2: Any reduction in lease payments affects only payments originally due on or before 30 June 2021 (this means that if a rent concession is reducing lease payments on or before 30 June 2021, and increasing those beyond 30 June 2021, the criteria is still met).
Criteria 3: There is no substantive change to other terms and conditions of the lease.
Lessees are exempt from having to assess individual lease contracts to determine whether rent concessions within scope of the amendment are lease modifications. Therefore, lessees are allowed to account for such rent concessions as if they were not lease modifications.
The amendment is effective for reporting periods starting on or after 1 June 2020, but to ensure the relief is available when needed most, lessees can apply the amendment immediately in any financial statements – interim or annual – not authorised for issue at 28 May 2020.
For any further information required, such as the disclosure requirements if such relief is availed of, please contact our technical team: ifrshelpdesk@zampadebattista.com