IFRS 16 – Leases Simplification of capturing changes in lease contracts due to the lowering of rent as a result of COVID-19
In May 2020, the IASB (International Accounting Standard Board) published an amendment to the IFRS 16 Leases standard, which is intended to simplify reporting of changes in the lease liability due to lowered rent during the period of or as a result of the COVID-19 pandemic. The EFRAG (European Financial Reporting Advisory Group) recommended this amendment to the European Commission for adoption on 2 June 2020.
In this amendment, IASB enables discounts on rent, which was originally due by 30 June 2021, not to be viewed as modifications of lease with all consequences of such a solution, but as a difference between the current value of the lease liability according to the original contract and the current value of the lease liability after inclusion of all discounts, concessions or time shift to be reported directly in the profit and loss statement.
This simplification cannot be used in cases, when other changes also occurred in the contract of lease, for example a shortening of the duration.
This amendment is effective for accounting periods beginning after 1 June 2020, earlier application is permitted on the presumption that the financial statement for a period beginning before 1 June 2020 was approved after 28 May 2020.
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