Exposure Draft on Covid-19-Related Rent Concessions (Proposed amendment to Ind AS 116, Leases)

Must read

TaxClue Teamhttp://taxclue.in
Taxclue is an online news portal for reporting all news, articles, judgments, Circulars, orders, and notifications relating to various corporate and tax laws in India. We use the tagline ‘Simplifying Laws’. Our mission is to Simplify the Laws and make people aware of their rights and duties in relation to tax matters in order to equip them to participate in nation-building.

Accounting Standards Board

The Institute of Chartered Accountants of India

4th June, 2020

Exposure Draft on COVID-19-Related Rent Concessions (Proposed amendment to Ind AS 116, Leases) corresponding to Amendments in IFRS 16 issued by the International Accounting Standards Board (IASB)

The implementation of high-quality Indian Accounting Standards (Ind ASs) by Indian Companies is a monumental step in the accounting history of India. The Institute of Chartered Accountants of India (ICAI) believes that Ind AS Framework has enhanced the quality of financial statements of Indian entities and strengthened their competitiveness and comparability. Trinity of high-quality financial reporting, sound corporate governance, and robust audit mechanism is critical to the success and growth of any economy.

Ind ASs are derived from IFRS Standards issued by the International Accounting Standards Board (IASB). IFRS Standards are globally acceptable high-quality financial reporting standards with a dynamic framework that undergoes reforms periodically to keep pace with the evolving business and economic environment. In order to remain converged, and to meet the pace of changing business environment, there is a need for us to actively participate in the IASB’s standard-setting activities.

Recently, the IASB has issued an amendment on COVID-19-Related Rent Concessions (Proposed amendment to IFRS 16, Leases).

As a result of the deadly Covid-19 pandemic, there would be many instances of lessors giving rent concessions to lessees as a result of the pandemic. The lessees could find it challenging to assess whether a potentially large volume of COVID-19-related rent concessions are lease modifications and, for those that are, to apply the required accounting in IFRS 16, especially in the light of the many challenges lessees face during the pandemic. Further, those challenges arising during the pandemic add to the work undertaken by lessees in implementing the new lessee accounting model in IFRS 16. The amendments to IFRS 16 provides the practical expedient to provide relief to lessees while enabling lessees to continue providing useful information about their leases to users of financial statements. The amendment aims to address issues affecting the application of IFRS 16 requirements to large volumes of rent concessions granted as a direct consequence of the COVID-19 pandemic during 2020. The amendment to IFRS 16 are as follows:

  • permits lessees, as a practical expedient, not to assess whether particular COVID-19-related rent concessions are lease modifications. Instead, lessees that apply the practical expedient would account for those rent concessions as if they did not lease modifications.
  • require a lessee applying the practical expedient to disclose the amount recognized in profit or loss to reflect changes in lease payments that arise from COVID-19-related rent concessions.
  • specify that in the reporting period in which a lessee first applies the amendment, the lessee is not required to disclose the information required by paragraph 28(f) of IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors.

The amendments to IFRS 16 does not specify any change in the requirements for lessors.

The Accounting Standards Board (ASB) noted that Indian entities preparing Ind AS based financial statements could be facing similar challenges and situations like the International scenario. In addition, there is a need to remain converged with IFRS standards. Accordingly, the ASB of ICAI has issued the Exposure Draft of proposed amendments to Ind AS 116, Leases, for comments.

The above-mentioned Exposure Draft is hosted on the website of the Institute of Chartered Accountants of India (www.icai.org) for public comments with the last date as June 10, 2020, and can be accessed at the following link on the knowledge sharing page of Accounting Standards Board of ICAI: https://resource.cdn.icai.org/59845asb48675.pdf

The comment period on the proposal is kept short to provide timely support to stakeholders at this difficult time.

How to comment:

Comments should be submitted using one of the following methods, so as to be received not later than June 10, 2020:

1. Electronically: Visit at the link http://www.icai.org/comments/asb/ (Preferred method):

2. Email: Comments can be sent to commentsasb@icai.in

Further clarifications on this Exposure Draft may be sought by e-mail to asb@icai.in.

 

Taxclue
TaxClue Team

Taxclue is an online news portal for reporting all news, articles, judgments, Circulars, orders, and notifications relating to various corporate and tax laws in India. We use the tagline ‘Simplifying Laws’. Our mission is to Simplify the Laws and make people aware of their rights and duties in relation to tax matters in order to equip them to participate in nation-building.

- Advertisement -spot_img

More articles

Leave a Reply

- Advertisement -spot_img

Latest article