January 28, 2022
AMENDMENT TO IFRS 16 FOR COVID-19 RELATED RENT CONCESSIONS
Why Internal Auditing Is Important?
- The IASB considered a “Practical expedient” to PROVIDE RELIEF for LESSEES (not for LESSORS) from lease modification accounting for Rent Concessions, in the form of Rent Holidays or Rent concessions for an agreed timeframe.
- Amendment to IFRS 16 – Leases: Issued in May 2020.
- Applicable for annual reporting periods beginning on or after June 1, 2020.
- Early application is permitted, including in financial statements not authorized for issue at February 28, 2020.
- Rent concession received by lessees should be a direct result of Covid-19 pandemic. “Practical expedient” allows LESSEES to elect NOT to carry out an assessment to decide WHETHER a Covid-19 Related Rent Concession is a Lease Modification or not.
- Three conditions for applying “Practical expedient”
- Consideration for the lease being substantially the same or less than the original consideration immediately before the concession;
- Concession relief for lease payments originally due on or before June 30, 2021; (if the reductions in lease payments extend beyond June 30, 2021, the rent concession in its entirety would not be within the scope of the practical expedient) and
- No substantial change to other terms and conditions of lease contract.
- A lessee shall apply retrospectively, as an adjustment to the opening retained earnings or other component of equity, as appropriate at the beginning of annual reporting period in which the lessee first applies the amendment.
- Disclosure requirements:
- Application of the practical expedient
- Amount recognized in statement of comprehensive income
Kudos PRS operates in UAE since 2009 and Our Chartered accountant services offer Audit & Assurance services, Accounting services, Taxation and Management Consultancy, VAT and TAX Advisory, Financial Audits and book keeping Services, Business and management consultancy Services.