IFRS 16 Covid rent concessions

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JRSB
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IFRS 16 Covid rent concessions

Post by JRSB »

Many people will be aware of the quickly-written covid-19 rent concession amendment, for lessees.

When can reporters in the EU actually apply it in their financial reporting?
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exIFRS
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Re: IFRS 16 Covid rent concessions

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EFRAG expects endorsement in Q3/Q4 of this year. I assume it will be retroactive back to 01/06/2020 in line with IFRS effective date?

http://www.efrag.org/Assets/Download?as ... %25202.pdf
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JRSB
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Re: IFRS 16 Covid rent concessions

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ok great, thanks. So the IASB turn it round sharpish and the EU sit on it for a few months! Not much help to those who for example have June year ends, wish to apply the amendment, and must report quickly.
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Re: IFRS 16 Covid rent concessions

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That about sums it up. Best you can do is drag out finalisation and hope for endorsement sooner rather than later. ;)
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Re: IFRS 16 Covid rent concessions

Post by nauman »

Earlier adoption is also permissible as per IASB thought the constraint seems to be from EU regulator it seems.
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Re: IFRS 16 Covid rent concessions

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But can't early adopt something not endorsed
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Marek Muc
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Re: IFRS 16 Covid rent concessions

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you may go for 'quiet' early adoption as long as the effect is immaterial ;)
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Re: IFRS 16 Covid rent concessions

Post by Marek Muc »

have a look at this statement by ESMA:
https://www.esma.europa.eu/sites/defaul ... ations.pdf

it seems to me that they basically ask local regulators to turn a blind eye to early adopters of the covid-19 rent concession amendment
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Re: IFRS 16 Covid rent concessions

Post by pub_acco »

It’s surprising EU regulators need so much time. This amendment was ratified in May in my country.
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Re: IFRS 16 Covid rent concessions

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A relevant update from the FRC:

"The Financial Reporting Council (FRC) has today confirmed it will not pursue regulatory action where issuers take advantage of the provisions contained in the Accounting for Lease Modifications (Amendment to IFRS 16 – Covid-19-Related Rent Concessions) before adoption by the EU."

https://www.frc.org.uk/news/august-2020 ... dification
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Re: IFRS 16 Covid rent concessions

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It's interesting because it opens the door for a de facto alternative IFRS regime so long as the regulator says it's not going to 'prosecute' incorrect reporting.

What about auditors signing off that accounts are properly prepared under IFRS?
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Marek Muc
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Re: IFRS 16 Covid rent concessions

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This statement is interesting:

'Where companies use the reliefs permitted by the IFRS 16 amendment, they are expected to disclose this in the notes to their financial statements.'

I thought there will rather a 'don't ask, don't tell' approach with materiality considerations in the background
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Re: IFRS 16 Covid rent concessions

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I guess your basis of preparation changes from "These financial statements have been prepared in accordance with EU endorsed International Financial Reporting Standards (IFRS)" to simply "These financial statements have been prepared in accordance International Financial Reporting Standards (IFRS)"

As long as they are prepared on that basis, that's the basis on which you audit.
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Re: IFRS 16 Covid rent concessions

Post by Marek Muc »

well, but the problem is that issuers in the EU are not allowed to prepare their FS under 'clean' IFRS
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Re: IFRS 16 Covid rent concessions

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Some more detail here if you are interested. I think it puts preparers in an awkward position for the reasons you have noted.

https://www.accountancydaily.co/frc-ame ... oncessions
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Re: IFRS 16 Covid rent concessions

Post by nauman »

Marek Muc wrote: 18 Aug 2020, 14:17 This statement is interesting:

'Where companies use the reliefs permitted by the IFRS 16 amendment, they are expected to disclose this in the notes to their financial statements.'

I thought there will rather a 'don't ask, don't tell' approach with materiality considerations in the background
We prepare our FS under IFRS and have lease obligations in excess of 1b USD and have disclosed the fact and the amount of rent relief recognized in the P&L in our interim financial statements.
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Marek Muc
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Re: IFRS 16 Covid rent concessions

Post by Marek Muc »

are these IFRS 'as approved by the IASB' or IFRS 'as adopted by your local authority'?

the thing is that in the EU you cannot use IFRS 'as approved by the IASB' but IFRS 'as adopted by the EU', and the EU has not yet approved the covid IFRS 16 amendment...
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Re: IFRS 16 Covid rent concessions

Post by nauman »

IFRS as approved by IASB.
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Marek Muc
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Re: IFRS 16 Covid rent concessions

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Then you're in a substantially different situation than issuers in the EU :)
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Re: IFRS 16 Covid rent concessions

Post by JRSB »

Now adopted by the EU...
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Re: IFRS 16 Covid rent concessions

Post by Marek Muc »

I'd say it didn't take long given EU's typical legislative pace ;)
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