IFRS 16 lease treatment adapted for Covid-19

Many leasing firms across the globe have been providing rent concessions and payment moratoria to their customers as a result of the difficulties arising during the Covid-19 pandemic. In order to simplify the accounting treatment of this on lessees' books, the International Accounting Standards Board (IASB) has implemented changes to the lease accounting standard, IFRS 16. The new rules allow firms to avoid having to change the value of their Right of Use assets (including the value of their former operating leases) to reflect lower agreed lease payments due to Covid-19.

Leaseurope met with the European Financial Reporting Advisory Group (EFRAG), the body that advises the European Commission on accounting standards, to discuss this amendment. We also took the opportunity to emphasise that IFRS 16 reporting requirements could benefit from further simplification on an ongoing basis for vehicle and equipment leases. EFRAG has recommended that these amendments be approved for use in Europe and unless objections are raised by the European Council, this is expected to be endorsed shortly.