Rizal Technological University

College of Business, Entrepreneurship, and Accountancy

Department of Accountancy

Covid-19-Related Rent Concessions beyond

30 June 2021
Amendment to IFRS 16

Gabuat, Sophia D.
Gaviola, Jessica R.
Habac, Renelle B.
Visca, Bianca Stephanie

CBEA-01-902A
Covid-19-Related Rent Concessions beyond 30 June 2021 (Amendment to IFRS 16)

Background
In May 2020, the IASB issued Covid-19-Related Rent Concessions (Amendment to IFRS 16). The
pronouncement amended IFRS 16 Leases to provide lessees with an exemption from assessing whether a
COVID-19-related rent concession is a lease modification. On issuance, the practical expedient was
limited to rent concessions for which any reduction in lease payments affects only payments originally
due on or before 30 June 2021.

Since lessors continue to grant COVID-19-related rent concessions to lessees and since the effects of the
COVID-19 pandemic are ongoing and significant, the IASB decided to look into whether to extend the
time period over which the practical expedient is available for use.

Project milestones

Date Development Comments

February 4, Issue first discussed by the IASB

2021

February Exposure draft ED/2021/2 Covid-19-Related Rent The exposure draft has a 14-day
11, 2021 Concessions beyond 30 June 2021 (Proposed comment period (25 February 2021)
amendment to IFRS 16) published

March 31, Covid-19-Related Rent Concessions beyond 30 June amendment is effective for annual
2021 2021 (Amendment to IFRS 16) issued reporting periods beginning on or
after 1 April 2021

Please refer to:

https://www.iasplus.com/en/projects/completed/leases/ifrs-16-covid-19-
2#:~:text=The%20IASB%20issued%20Covid%2D19%2DRelated%20Rent%20Concessions%20beyond
%2030,16)%20on%2031%20March%202021.

IASB Minutes of Meeting - March 10, 2021 for Exposure Draft COVID-19-Related Rent Concessions
beyond 30 June 2021 (Proposed Amendment to IFRS 16):
https://www.iasplus.com/en/meeting-notes/iasb/2021/march-supplementary/ifrs-16-covid-19

The key differences between IFRS 16 and AIS 17

IAS 17 was reissued in December 2003 and applies to annual periods beginning on or after 1 January
2005. IAS 17 will be superseded by IFRS 16 Leases as of 1 January 2019.

IAS 17 Leases (developed by the International Accounting Standards Committee) is currently being
replaced by IFRS 16 Leases (developed by the International Accounting Standards Board).
Source: https://opalwave.com/ifrs-16/the-key-differences-between-ifrs-16-and-ias-17/
Transition: Covid-19-related rent concessions for lessees

 A lessee shall apply Covid-19-Related Rent Concessions beyond 30 June 2021 retrospectively,
recognizing the cumulative effect of initially applying that amendment as an adjustment to the
opening balance of retained earnings (or other component of equity, as appropriate) at the
beginning of the annual reporting period in which the lessee first applies the amendment.
 In the reporting period in which a lessee first applies Covid-19-Related Rent Concessions beyond
30 June 2021, a lessee is not required to disclose the information required by paragraph 28(f) of
IAS 8.
 Applying paragraph 2 of this Standard, a lessee shall apply the practical expedient in paragraph
46A consistently to eligible contracts with similar characteristics and in similar circumstances,
irrespective of whether the contract became eligible for the practical expedient as a result of the
lessee applying Covid-19-Related Rent Concessions (see paragraph C1A) or Covid-19-Related
Rent Concessions beyond 30 June 2021 (see paragraph C1C).

Approval by the Board of Covid-19-Related Rent Concessions beyond 30 June 2021 issued in
March 2021 (REPORT 4)

Covid-19-Related Rent Concessions beyond 30 June 2021, which amended IFRS 16, was approved for
issue by 11 of 13 members of the International Accounting Standards Board. Anderson and Gast
dissented. Their dissenting opinion is set out after the Basis for Conclusions.

Hans Hoogervorst (Chairman)

Suzanne Lloyd (Vice-Chair)
Nick Anderson (Voted against)
Tadeu Cendon
Martin Edelmann
Françoise Flores
Zachary Gast (Voted against)
Jianqiao Lu
Bruce Mackenzie
Thomas Scott
Rika Suzuki
Ann Tarca Mary Tokar

Note: 10 members voted in favor of the staff recommendation, with 2 against and 1 member being absent.

Dissent of Nick Anderson and Zachary Gast from Covid-19-Related Rent Concessions beyond 30
June 2021

Nick Anderson and Zachary Gast voted against the publication of Covid-19-Related Rent Concessions
beyond 30 June 2021. They are concerned that an extension to the period during which the practical
expedient is available will further impede comparability between lessees that apply the practical
expedient and those that do not. They note that support from users of financial statements for Covid-19-
Related Rent Concessions (the 2020 amendment) was predicated on limiting the practical expedient to a
specific time frame that the amendment will extend by 12 months. They also note that one key reason the
Board developed the 2020 amendment was because, at that time, lessees were applying IFRS 16 for the
first time and that this is no longer the case.
Impact on Affected entities (medium)

The amendment to IFRS 16 will provide relief to lessees for accounting for rent concessions from lessors
specifically arising from the covid-19 pandemic. While lessees that elect to apply the practical expedient
do not need to assess whether a concession constitutes a modification, lessees still need to evaluate the
appropriate accounting for each concession as the terms of the concession granted may vary.

Number of entities affected (many)

The amendment affects all lessees provided with a rent concession in relation to COVID-19 that extend
beyond June 2021.

SOURCE:
https://cdn.ifrs.org/content/dam/ifrs/project/ifrs-16-covid-19/ed-rent-concessions-beyond-30-june-
2021.pdf

file:///C:/Users/test/Downloads/IFRS2021_1_WEBSITE_190.pdf.pdf
 COVID-19-RELATED RENT CONCESSIONS BEYOND 30 JUNE 2021

Amendment to IFRS 16 Leases

Paragraph 46B is amended. Paragraphs C1C and C20BA–C20BC are added. New text is
underlined and deleted text is struck through.

Effective date

C1C

Covid-19-Related Rent Concessions beyond 30 June 2021, issued in March 2021, amended
paragraph 46B and added paragraphs C20BA–C20BC. A lessee shall apply that amendment for
annual reporting periods beginning on or after 1 April 2021. Earlier application is permitted,
including in financial statements not authorized for issue at 31 March 2021.

Transition

C20BA

A lessee shall apply Covid-19-Related Rent Concessions beyond 30 June 2021 (see
paragraph C1C) retrospectively, recognising the cumulative effect of initially
applying that amendment as an adjustment to the opening balance of retained
earnings (or other component of equity, as appropriate) at the beginning of the annual
reporting period in which the lessee first applies the amendment.

C20BB

In the reporting period in which a lessee first applies Covid-19-Related Rent

Concessions beyond 30 June 2021, a lessee is not required to disclose the
information required by paragraph 28(f) of IAS 8.

C20BC

Applying paragraph 2 of this Standard, a lessee shall apply the practical expedient in
paragraph 46A consistently to eligible contracts with similar characteristics and in
similar circumstances, irrespective of whether the contract became eligible for the
practical expedient as a result of the lessee applying Covid-19-Related Rent
Concessions (see paragraph C1A) or Covid-19-Related Rent Concessions beyond 30
June 2021

Amendment to IFRS 16 Leases

Paragraph 46B is amended. Paragraphs C1C and C20BA–C20BC are added. New text is
underlined and deleted text is struck through.
Lease modifications

...

The practical expedient in paragraph 46A applies only to rent concessions occurring as a direct
consequence of the covid-19 pandemic and only if all of the following conditions are met:

(a) the change in lease payments results in revised consideration for the lease that is
substantially the same as, or less than, the consideration for the lease immediately
preceding the change;

(b) any reduction in lease payments affects only payments originally due on or before 30
June 2022 2021 (for example, a rent concession would meet this condition if it results in
reduced lease payments on or before 30 June 2022 2021 and increased lease payments
that extend beyond 30 June 2022 2021); and

(c) there is no substantive change to other terms and conditions of the lease.
 THE 2020 AMENDMENTS

IFRS 16.C1A The 2020 amendments were issued on 28 May 2020 and are effective for
annual periods beginning on or after 1 June 2020. Early application is
permitted. For instance, a lessee would be permitted to apply the practical
expedient to any set of financial statements not authorized for issue at the
date the amendments were issued.

IFRS 16.C20A A lessee applies the 2020 amendments retrospectively, recognizing the
cumulative effect as an adjustment to the opening balance of retained
earnings or other component of equity, as appropriate. This means that a
lessee does not adjust comparative figures. However, in interim reporting,
a restatement of the results for a previous interim period may arise when
the amendments are applied retrospectively.

IFRS 16.C20B Application of the 2020 amendments is a change in accounting policy.

However, a lessee is not required to disclose the quantitative information
required by paragraph 28(f) of IAS 8 in the reporting period in which it
first applies the amendments.

THE 2021 AMENDMENTS

IFRS 16.C1C The 2021 amendments were issued on 31 March 2021 and are effective for
annual periods beginning on or after 1 April 2021. Early application is
permitted. For instance, a lessee would be permitted to apply the practical
expedient to any set of financial statements not authorized for issue at the
date the amendments were issued.

IFRS 16.C20BA A lessee applies the 2021 amendments retrospectively, recognizing the
cumulative effect of the amendments as an adjustment to the opening
balance of retained earnings or other component of equity, as appropriate.

IFRS 16.C20BB Application of the 2021 amendments is a change in accounting policy.

However, a lessee is not required to disclose the quantitative information
required by paragraph 28(f) of IAS 8 in the reporting period in which it
first applies the amendments.
IAS 8 PARAGRAPH 28(F)

When initial application of an IFRS has an effect on the current period or any prior period, would
have such an effect except that it is impracticable to determine the amount of the adjustment, or
might have an effect on future periods, an entity shall disclose:

(F) for the current period and each prior period presented, to the extent practicable, the amount of
the adjustment:

(i) for each financial statement line item affected; and

(ii) if IAS 33 Earnings per Share applies to the entity, for basic and diluted earnings per
share;

Paragraph 28(f) of IAS 8 requires a company that initially applies a standard or

amendment to disclose to the extent practicable, the effect of adopting the standard or
amendments on each financial statement line item and on basic and diluted EPS, for the current
period and each prior period presented.

Are the 2021 amendments optional?

No. If a company elected to apply the 2020 amendments, then the 2021 amendments are
mandatory. This is because a lessee applies the practical expedient consistently to eligible
contracts that share similar characteristics and in similar circumstances, irrespective of when the
rent concession became eligible. If a lessee has not yet established an accounting policy for rent
concessions, then it remains eligible to elect the practical expedient. That election will determine
whether the entity applies the 2021 amendments.

Are the amendments available for immediate application?

In effect, yes. By choosing to adopt the amendments early, including in financial

statements not yet authorized for issue, a lessee can effectively adopt the amendments
immediately.

An important standard-setting consideration for any amendment is when and how to

apply the amendment in the financial statements. The Board normally sets a later effective date
for amendments so that a preparer gets adequate time to reflect them.

However, because of the urgent nature of the COVID-19 situation, the Board permitted
early application of each of the 2020 amendments and the 2021 amendments, with effective
dates very shortly after the dates of issuance. In each case, the transition guidance states that the
amendments can be applied in financial statements not yet authorized for issue.
Can a first-time adopter of IFRS Standards use the 2021 amendments?

Yes. The amendments form part of the body of IFRS Standards that a first-time adopter
would apply.

For example, if a company adopts IFRS Standards in its annual financial statements for
the year ended 31 December 2021 and presents one year of comparative financial information,
then it would apply the 2021 amendments.

Rent concessions that did not qualify under the 2020 amendments

It is possible that a rent concession that did not qualify for the practical expedient under
the 2020 amendments will qualify under the 2021 amendments. A lessee applies the practical
expedient consistently to eligible rent concessions that share similar characteristics and in similar
circumstances. This means that a lessee may be required to reverse its previous lease
modification accounting when it applies the 2021 amendments.

Lessees that did not have eligible rent concessions in 2020

A lessee may not have received eligible rent concessions during 2020 but may receive
eligible rent concessions in 2021. For example, a lessee with a December year end may have
received no rent concessions in 2020 but may receive rent concessions in 2021 because of the
prolonged nature of the COVID-19 pandemic.

As a result, such lessee may have no stated accounting policy in respect of the practical
expedient when finalizing its 2020 financial statements. Therefore, it may choose whether to
apply the practical expedient in its financial statements in 2021 when it receives eligible rent
concessions.
The Changes in Covid-19-Related Rent Concessions beyond 30 June 2021 (Amendment to
IFRS 16) amend IFRS 16 to

1. Permit a lessee to apply the practical expedient regarding COVID-19-related rent

concessions to rent concessions for which any reduction in lease payments affects only
payments originally due on or before 30 June 2022 (rather than only payments originally due
on or before 30 June 2021);
2. Require a lessee applying the amendment to do so for annual reporting periods beginning on
or after 1 April 2021;
3. Require a lessee applying the amendment to do so retrospectively, recognizing the
cumulative effect of initially applying the amendment as an adjustment to the opening
balance of retained earnings (or other component of equity, as appropriate) at the beginning
of the annual reporting period in which the lessee first applies the amendment; and
4. Specify that, in the reporting period in which a lessee first applies the amendment, a lessee is
not required to disclose the information required by paragraph 28(f) of IAS 8.

References:

Covid-19-Related Rent Concessions beyond 30 June 2021 Amendment to IFRS 16

https://www.ifrs.org/content/dam/ifrs/publications/amendments/english/2021/covid-19-related-
rent-concessions-beyond-30-june-2021-amendment-to-ifrs-16.pdf

IASB extends practical relief regarding COVID-19-related rent concessions (iasplus.com)

https://www.iasplus.com/en/news/2021/03/ifrs-16#:~:text=Changes

https://assets.kpmg/content/dam/kpmg/xx/pdf/2020/06/leases-rent-concessions.pdf