COVID-related rent concessions beyond 30 June 2021

18 February 2021: As lockdown continues, the issue of commercial rent concessions is certainly topical. Now the IASB is proposing an extension to the availability of the practical expedient issued last year that allows entities to account for rent concessions due to COVID-19 in a simpler way.

The practical expedient issued last year by the IASB means entities can choose not to account for changes in lease payments due to the COVID-19-related rent concession as lease modifications. In broad terms, this means the benefits of the rent concession can be recognised in the period that they are received, instead of spreading over the term of the lease.

Certain conditions were attached to the practical expedient, including the requirement that it only applies to reductions in lease payments due on or before 30 June 2021. In light of the ongoing effects of the global COVID-19 pandemic, the IASB is now proposing this be extended by a year such that it could be applied to reductions in lease payments due on or before 30 June 2022.

Who will this proposal affect?

The proposal would affect lessees that elect to apply the practical expedient and are granted rent concessions that reduce lease payments due after 30 June 2021, but not beyond 30 June 2022, and meet the other conditions for applying the practical expedient. The proposal would not affect lessees that have already established an accounting policy of not applying the practical expedient to eligible rent concessions.

What is your experience?

The UK Endorsement Board (UKEB), the body responsible for endorsing new and amended IFRSs for use in the UK, is seeking feedback from ICAEW members on the proposed extension. In particular, UKEB is keen to obtain ICAEW member views on whether the practical expedient is still required and whether the extension of the qualifying payment date to 30 June 2022 is necessary. 

UKEB is also keen to hear about the experiences of companies that applied the original practical expedient and any views on how business would be affected if this current amendment were adopted. 

ICAEW’s Financial Reporting Faculty will also be responding to the IASB’s proposals. Due to the time-sensitive and urgent nature of these proposals, the deadline for comments to the IASB is 25 February 2021. 

Sarah Dunn, Technical Manager in ICAEW’s Financial Reporting Faculty said: “We encourage ICAEW members to share their experience of applying the IASB’s practical expedient for COVID-19-related rent concessions and their thoughts on the proposed extension. This will help ICAEW and the UKEB represent UK views when responding to the IASB.”

Members can send comments via ICAEW’s Financial Reporting Faculty to frfac@icaew.com or directly to the UKEB at Contact@endorsement-board.uk