Accounting for COVID-19 related rent concessions and other modifications to lease contracts, from the lessee’s perspective
Implementing IFRS 16 Leases was a substantial task for many preparers, and COVID-19 has brought a new and unexpected source of difficulty and complexity.
The challenges posed by COVID-19 have resulted in a significant increase in the number of leases being re-negotiated or modified, usually where tenants can no longer operate, or have experienced a sudden drop in revenue. As a result, the IASB has issued a limited-scope amendment to IFRS 16 Leases to reduce the administrative burden of accounting for lease adjustments which have arisen as a direct consequence of the COVID-19 pandemic.
The IFRS Advisory Committee published an article RSM INSIGHT: Accounting for Changes to Lease Contracts. In this article, the Committee explains the limited-scope amendment to IFRS 16 for modifications arising directly from COVID-19, and provide illustrative examples of how different types of modifications would be accounted for.
You can read the Accounting for Changes to Lease Contracts article HERE
Compliments of RSM International Ltd. – a member of the EACCNY.