IFRS news, May 2020

The document presents information on the amendment to IFRS 16, published by the IASB, providing an optional practical expedient for lessees from assessing whether a rent concession related to COVID-19 is a lease modification.  Also, it presents a number of narrow-scope amendments deriving from the IASB issue and offers information on post-model adjustments for expected credit losses during COVID-19.

In this issue

A look at current financial reporting issues

IFRS 16 COVID-19 rent concessions amendment

As a result of the coronavirus (COVID-19) pandemic, rent concessions have been granted to lessees. Such concessions might take a variety of forms, including payment holidays and deferral of lease payments. 

IASB issues a number of narrow-scope amendments 

The IASB (‘Board’) issued a bundle of narrow-scope amendments on 14 May 2020:

  • IAS 16: ‘Property, Plant and Equipment – Proceeds before Intended Use’; • IAS 37: ‘Onerous Contracts – Cost of Fulfilling a Contract’; 
  •  IFRS 3: ‘Reference to the Conceptual Framework’; and 
  • Annual Improvements to IFRS Standards 2018–2020 affecting IFRS 1, IFRS 9, IFRS 16 and IAS 41. All of the amendments are effective 1 January 2022

Post-model adjustments for expected credit losses during COVID-19

Key considerations in applying post-model adjustments or ‘overlays’ in estimating expected credit losses

Banks calculate expected credit losses (‘ECLs’) under IFRS 9 using forward-looking judgements, models and data. Overlays, or post-model adjustments, are often used to address shortcomings where models or data have limitations. As a result of severe economic conditions and uncertainty arising due to coronavirus (COVID-19), there is an increased need to apply overlays in calculating ECLs. In this publication, we provide considerations that might be helpful in developing and monitoring such overlays.

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