Rent concessions

Possible extension of the date for COVID-19-related rent concessions past 30 June 2021

International Accounting Standards Board (IASB) held a supplementary meeting on 4 February 2021 to discuss whether it should extend the period over which the practical expedient in IFRS 16 Leases, paragraph 46A can be used by lessees for ‘short cut’ accounting of COVID-19-related rent concessions (i.e. not needing to assess whether each concession is a lease modification).

It tentatively decided to extend the date from 30 June 2021 to 30 June 2022. When this amendment is approved (estimated late March 2021), entities will be able to use the practical expedient in paragraph 46A for COVID-19-related rent concessions where a reduction in lease payments affects payments due or before 30 June 2022, rather than 30 June 2021.

Implications

We are likely to see more lessees using the practical expedient for COVID-19-related rent concessions than before including, for example, where:

  • Rent concessions negotiated during the first wave of COVID-19 affected payments due after 30 June 2021, and
  • Additional rent concessions negotiated due to extended lockdowns during the second wave where payments will be reduced beyond 30 June 2021.

More information

Please reads BDO’s International Financial Reporting Bulletin, IFRB 2021 05 Extension to COVID-19 Practical Expedient (IFRS 16) for more information.