As a reaction to COVID-19 in Germany, various civil law provisions on the exclusion of termination in tenancy law, on deferral of payment in consumer loan agreements and contracts that secure the further going concern came into force on 1 April 2020. As a result, rental contracts, in particular, may not be terminated due to rent debts in the period from April to the end of June 2020, provided that the incurrence of the rent debts is attributable to COVID-19, such as the closure of retail stores for a certain period of time.
On 10 April 2020, the IASB published a statement which addresses the requirements of IFRS 16 with regard to the accounting for such rental concessions. This guidance discusses whether and to what extent a change in lease payments constitutes a change in the lease and thus results in a corresponding change in the accounting treatment of the lease.
IFRS 16 sets out specific requirements for accounting for changes in leases. Whether a change in the lease payments results in a corresponding change in accounting depends on whether the change in payment meets the definition of a lease amendment.
IFRS 16 defines a change in a lease as a change in the scope of a lease or the consideration for a lease that was not part of the original terms of the lease.
If neither the scope of the lease nor the consideration for the lease changes, there is no change in the lease. Thus, if a lessee does not pay rent during the period referred to above, but thereafter the rent is increased proportionately so that the total consideration remains unchanged, there is no change in the lease. If, alternatively, a force majeure clause has been contractually agreed and COVID-19 can be interpreted as force majeure, this is not a change in the lease either.
On 17 April 2020, the IASB subsequently proposed short-term amendments to IFRS 16, which are limited to the year 2020. The amendments grant lessees the option to omit the assessment of whether a change in lease payments due to COVID-19 constitutes a change in the lease. Lessees will therefore be relieved as they will not have to make a legal assessment of all leases affected by, for example, changes in lease payments.
Comments on the IASB’s short-term changes are possible for a period of 14 days so that the exemption can come into force by the end of May.