No-brainer or brainteaser ?

The International Accounting Standards Board (IASB) today published an Exposure Draft (ED 2021/2) on “Covid-19-Related Rent Concessions
beyond 30 June 2021′.

Main point: the end date of the ‘practical expedient’, a (temporary) practical solution, for the treatment of concessions (final reductions) on rent and lease payments is moved from 30 June 2021 to 30 June 2022.

No-brainer or brainteaser ?

The proposed extension of the alternative treatment of rent and lease reductions due to Covid-19 in the ED published today seems like a no-brainer, but there may be reason to think of it as a brainteaser.

In fact, since the introduction of the standard IFRS 16 Leases, there has been this practical expedient, which can be applied by (almost) all companies and institutions reporting on the basis of IFRS guidelines. The restriction that was applied before, and that applies again now, is that the reduction of the lease and rental payments must be a direct consequence of the Covid-19 pandemic and may only apply to periods that end on or before the end date.

Discussion point

Previously, various parties have argued that the Leases Standard does not sufficiently reflect the actual characteristics of a lease transaction.

Shouldn’t a lease reduction agreed by the parties always have direct consequences for the income statement?
Hasn’t practice, in this case the Covid-19 situation, shown that the Leases standard is less adequate than thought when the rules were adopted at the beginning of 2019?
Is this not a case of structurally inadequate regulation that needs to be improved?

ED 2021/2

For the die-hards, who want to take note of the exposure draft itself, see attached.