Business advice
and accounting

Our purpose is to help you on your journey as you grow. Learn more about our history, partners and purpose.

Our purpose is to help you on your journey as you grow. Learn more about our history, partners and purpose.

Your partners for Business Service and Advisory, Taxation, Audit, Business Valuation, Forensic Accounting, Fraud & Risk and Business Valuation Services.

Whatever your business, industry or family office, from local or international institutions we bring extensive expertise.

We're one team with a purpose and passion for what we do. Learn about our culture and career opportunities available to you.

Uncovering insights, trends and inspiration to help business grow in an ever-changing world.

We are always looking for ways to engage and give back to our community.

Telephone: +612 9283 1666
Email: admin@esvgroup.com

Level 13, 68 York Street,
Sydney NSW 2000

Why us

Our purpose is to help you on your journey as you grow. Learn more about our history, partners and purpose.

What we do

Your partners for Business Service and Advisory, Taxation, Audit, Business Valuation, Forensic Accounting, Fraud & Risk and Business Valuation Services.

Who do we help

Whatever your business, industry or family office, from local or international institutions we bring extensive expertise.

Work with us

We're one team with a purpose and passion for what we do. Learn about our culture and career opportunities available to you.

What we think

Uncovering insights, trends and inspiration to help business grow in an ever-changing world.

Working to give back

We are always looking for ways to engage and give back to our community.

Contact us

Telephone: +612 9283 1666
Email: admin@esvgroup.com

Level 13, 68 York Street,
Sydney NSW 2000

The rent related abatements maze due to COVID-19

13 May 2020

by Tim Valtwies and Harsh Sood

The International Accounting and Standards Board (IASB) have issued an Exposure Draft ED/2020/2 COVID-19 relating to Rent Concessions. Many lessees around the world are seeking rent concessions in the form of one-off rent reductions, rent waivers or deferral of rent payments during this economic downturn.

Under IFRS 16, rent concessions often meet the definition of lease modifications and accounting for these lease modifications can be complex. For example, lessees could be required to re-calculate their right of use for assets using a revised discount rate.

The objective of the Exposure Draft is to provide relief during the COVID-19 pandemic from treating rental concessions as lease modifications.

The resulting accounting application would depend on the details of the rent concession. For example, if the lessee has received a one-off concession in the form of a rental reduction, it would be treated as a variable lease payment and is recognised in the profit or loss statement. The lessee will continue to reduce the lease liability and amortise the right of use asset with rent concessions recognised in the profit and loss as other income. It should also be noted that lessees must disclose that they have applied the exemption in their financial statements.

The exemption will only apply if the following conditions are met:

  1. The revised consideration is substantially the same terms or less than the original consideration;
  2. The reduction in lease payments relates to payments due in the year 2020; and
  3. No other substantive changes have been made to the terms of the lease.

There are no exemptions proposed for lessors and they are required to continue to assess if the rent concessions are lease modifications and account for them accordingly.

The Exposure Draft is expected to be finalised by the end of May 2020 at which point the AASB will amend the Australian standard. This would be effective for periods beginning on or after 1 June 2020, with earlier application permitted.

The application of AASB 16 Leases can be complex – if you need assistance please contact your ESV Engagement Partner on 9283 1666 and they can provide advice based on your circumstances.