20 April 2020
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In response to the COVID-19 coronavirus pandemic, the International Accounting Standards Board (the Board) has proposed targeted amendments to two IFRS Standards and significant changes to its work plan. These actions follow the publication of educational material on accounting for financial instruments and leases.
The Board has proposed some targeted reliefs in response to COVID-19 but remains focused on consistent and robust application of IFRS Standards.
Rent concessions – Proposed relief for lessees
Many companies are seeking rent concessions – i.e. waivers, reductions or deferrals of lease payments. Under IFRS 16 Leases, rent concessions often meet the definition of a lease modification and the accounting can be complex. For example, the lessee may be required to recalculate lease assets and liabilities using a revised discount rate.
The Board proposes to allow lessees not to account for rent concessions as lease modifications in 2020 if they arise as a direct consequence of COVID-19. The resulting accounting will depend on the details of the rent concession but could involve recognition of the benefit of the rent concession in profit or loss. No relief is proposed for lessors.
The Board plans to publish an exposure draft (ED) shortly. Under an accelerated due process, the ED will be open for comment for only 14 days.
Classification of liabilities – Proposed deferral of effective date
The Board proposes to delay the effective date of Classification of Liabilities as Current or Non-Current (amendments to IAS 1) by one year – from 2022 to 2023.
The Board believes this will provide affected companies with more time to re-negotiate the covenants in their loan agreements which, in current conditions, could take longer than initially expected.
The Board plans to publish an ED in May, with a 30-day comment period.
Work plan – Focus on priority projects
The Board restated its commitment to complete key high-priority projects – including IBOR Phase 2 and the amendments to IFRS 17 Insurance Contracts.
In other areas, the Board has agreed significant changes to its work plan, extending comment deadlines and extending project timelines. For example, the Board has extended by three months the comment period for the following open consultations:
- General Presentation and Disclosures ED;
- Comprehensive Review of the IFRS for SMEs Standard request for information; and
- Business Combinations—Disclosures, Goodwill and Impairment discussion paper (DP).
Further, the Board has delayed the publication dates of certain major forthcoming consultation documents – e.g. the planned discussion paper on business combinations under common control.
Next steps and more information
The comment period for both amendments will be much shorter than usual. So we encourage you to watch out for the EDs, determine the impact for your business and take the opportunity to comment.
For further information on the financial reporting implications of the COVID-19 pandemic, please go to our COVID 19 | Financial reporting resource centre, which is continually updated as significant accounting and reporting issues arise. We encourage you to bookmark this page and check back frequently for updates.
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