CA ANZ and CPA Australia have lodged a joint submission supporting the IASB’s proposals to amend the application of IFRS 16 Leases in response to the COVID-19 pandemic. The changes will allow lessees the option of simplifying the treatment of any COVID-19 related rent concessions, such as rent reductions or holidays, which might otherwise require complex recalculation of lease liabilities.
However, the scope of the relief offered by the proposals is currently limited to lease payments due in 2020. Since the impacts of the pandemic are ongoing, our submission argues the relief should be extended to payments relating to 2021 as well. However, this should be conditional on the rent alterations being agreed to in 2020 and being clearly COVID-19 related. We also note we note the term “rent concessions” suggests the relief is relevant to property leases only, although the intention clearly is to make the relief available to all types of leases. Accordingly, we suggest changing the term from “rent concessions” to “lease payment concessions”.
The submission also supports the planned application date of 1 June 2020 with early adoption and limited retrospective application permitted, as this will facilitate the use of this practical expedient by as many entities as possible around the world.