grant the lessee free or reduced rent – and are not modifications are generally accounted for as negative variable lease payments.Ĭertain concessions do not change the scope of or consideration for a lease and are therefore not accounted for as lease modifications. Concessions that change the consideration for the lease – e.g. If a landlord did not have an obligation under the original lease contract to grant a rent concession, and the concession results in a change to the scope of or consideration for the lease, then the lessor’s agreement to grant a concession is accounted for as a lease modification. a landlord may accept variable rent based on sales in lieu of base rent), or waiving variable rent payment minimums. Landlords have also accepted decreased rent from tenants, such as by changing rent payments from fixed to variable (e.g. forgo rent for a specified number of months in return for extending the non-cancellable term of the lease by the same number of months at the same rent.defer rental payments for a specified number of months with the deferred amounts added to the remaining rent payments within the existing lease term or.Most commonly, landlords have permitted tenants to either: Many landlords have provided commercial tenants with rent concessions, including rent-free periods, decreased rent and interest-free rent deferrals. The accounting for these reduced lease payments depends on whether the lessee was contractually permitted to withhold or defer rent. As a result of these economic pressures, many tenants, particularly those in the retail and services industries, have made rent payments that are less than the amount that was contractually owed. In addition, we discuss considerations and the related accounting consequences for landlords moving forward.Īcross the country, many cities and states implemented orders requiring businesses to operate at reduced capacity or to close entirely. In this article, we summarize four immediate financial reporting considerations for landlords relating to tenant lease payments, construction delays, debt, fair value and impairment. While much of the focus has been on the difficulties faced by tenants unable to pay rent, landlords have also faced profound business challenges with significant financial reporting implications under IFRS ® Standards. COVID-19 has presented no shortage of challenges to the real estate sector.
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