Amendment to IFRS 16 on rent concessions beyond 30 June 2021

Keywords: Mazars, Thailand, IFRS, IFRS 16, Rent concessions, IASB, COVID-19, IAS 8

21 May 2021

On 31 March 2021, less than two months after the publication of the exposure draft, the IASB published a new amendment to IFRS 16 entitled “Covid-19 Related Rent Concessions beyond 30 June 2021” (available here and free to access for three months). The new amendment extends the practical expedient set out in paragraph 46A, which permits an entity to account for any change in lease payments resulting from Covid-19-related rent concessions as if the change were not a lease modification. Thus, the impact of the rent concession would be recognised in profit or loss for the period, and not over the residual term of the lease.

The new amendment thus permits a lessee to apply the practical expedient to concessions on lease payments due up to 30 June 2022 (instead of 30 June 2021 as currently).

The newly published amendment specifies that:

• a lessee shall apply the practical expedient in paragraph 46A consistently to all eligible contracts with similar characteristics and in similar circumstances, regardless of whether the contract became eligible as a result of the original May 2020 amendment or the March 2021 amendment. This raises some practical application difficulties, in particular because of the retroactive effect of the amendment. Rent concessions that were initially excluded from the scope of the May 2020 amendment, as they related to lease payments due after 30 June 2021, may now fall within the scope of the new amendment and would therefore need to be restated retrospectively.
• the disclosures in paragraph 28 (f) of IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors are not required.

The amendment is applicable to financial periods beginning on or after 1 April 2021 and early application is permitted, including for financial statements not yet authorised for issue at 31 March 2021. It is now awaiting endorsement by the EU.

The amendment will be applicable retrospectively and the cumulative impact of initial application shall be recognised as an adjustment to the opening balance of retained earnings (or other component of equity, where appropriate).