Our country is fighting against Covid-19 Panadamic but the income source of most of the employees get affected. Some are getting a part of their salary but there are also a number of people who are not getting any salary. In this tough situation, ICAI has issued an Exposure Draft on COVID-19 related Rent concessions.
ICAI stands for Institute of Chartered Accountants of India, it is the national professional accounting body of India established to regulate the profession of Chartered Accountancy in the country.
It is notable that, many countries around the globe are providing rent concessions to lessees, as a relief in this pandemic period. There are also a few countries which are expected to provide a similar relief soon. These type of concessions are especially prevalent for leases of retail property and in some cases promoted by governments or jurisdictional authorities.
The exposure draft that is issued by ICAI proposes to perform modification to IFRS 16 to provide practical relief to lessees during the Coronavirus pandemic. At the same time, it also enables them to stay up-to-date with useful information about their leases to users of financial statements. In case of occurrence of any complexity due to COVID-19 pandemic then it adds to the work being undertaken in implementing the new lessee accounting model in IFRS 16.
Now the proposed amendment intends to consider all the issues that are affecting the application of IFRS 16 requirements to large volumes of proposed rent concessions given as a direct consequence of the COVID-19 pandemic in this year.
As per the Released exposure draft:
- The proposed amendment permits lessees, as a practical expedient, not to assess whether particular Covid-19-related rent concessions are lease modifications. Instead of it, lessees that apply the practical expedient would account for those rent concessions as if they did not lease modifications.
- The proposed amendment requires lessees that apply the practical expedient to disclose that fact.
The Exposure Draft doesn’t propose any change for lessors. However, there are some specific questions asked in the Exposure Draft, but along with it, stakeholders are also requested to provide their response to some more questions which are related to the relevance of the ED’s proposals in the Indian context.
The ICAI also stated that the proposed amendments only applicable for rent concession related to COVID-19. The new annual reporting periods will begin on or after 1 June 2020 thus limiting its applicability of the proposed amendments for a very short period.
In this matter, the stakeholders are also requested to raise their concerns that whether in the Indian context “Ind AS 116 leases” will be revised or not, on the basis of the final amendments on the Exposure Draft issued by the IASB.