Impact Of COVID-19 On IFRS 16

The current pandemic has made businesses worldwide undergo serious distress. Before preparing financial statements, one needs to reassess fundamental estimates and assumptions, which were otherwise presumed.

As a relief measure, lessors have started providing lease rent concessions in the form of rent reductions, rent deferrals, or even complete rent holidays.

Businesses are still adapting to the new accounting for leases after the introduction of IFRS 16. The new standard has given specific guidelines on the accounting treatment in case of modification in any lease contract. Companies that have received lease concessions due to the pandemic will also be tested under these provisions. However, these modification provisions may prove to be complicated and cause a major impact on the financial statements.