Businessman walking through an empty warehouse.

How to account for rent holidays granted in response to COVID-19

Lessees that have taken advantage of rent concessions during the pandemic need to consider the appropriate accounting treatment.


Many businesses have obtained, or are expecting to obtain, rent holidays or short-term rent reductions in response to the COVID-19 pandemic.

Whilst these and other rent concessions have been welcomed, they raise a number of questions and challenges regarding the accounting treatment for both lessees (the tenants) and lessors (the landlords). Guidance on accounting for changes in lease payments for both lessees and lessors is provided by IFRS 16 Leases. However, the standard requires entities to separately analyze each individual rent concession based upon complex and judgemental criteria to determine the appropriate accounting. This poses challenges to business due to the large volume of leases and the disruption caused by COVID-19.

To help preparers, the International Accounting Standards Board (IASB) released a document in April 2020 (pdf), highlighting the requirements within IFRS 16 and other accounting standards for entities considering how to account for rent concessions granted as a result of the pandemic.

Following this, in May 2020, the IASB issued COVID-19-Related Rent Concessions - Amendment to IFRS 16 Leases. The amendment allows lessees a “practical expedient” to account for certain rent concessions occurring as a direct consequence of COVID-19 that reduce lease payments due on or before June 2021.

Rent holidays and other concessions have been welcomed by
companies during the pandemic, but there are a number of
questions and challengesregarding the accounting treatment for
both tenants and landlords.

The amendment provides welcome relief for lessees. However, there are still a number of accounting issues that will need to be considered.


EY’s publication Applying IFRS: Accounting for COVID-19 related rent concessions looks in further detail at the requirements of IFRS 16 and how the amendment is applied.


The publication discusses when the practical expedient applies, what approaches can be taken when it is applied and the relevant disclosures required. It also considers the accounting by lessors, as the amendment applies only to lessees.


Struggling businesses around the globe have been offered rent holidays to support them during the COVID-19 pandemic. This is helping many to survive, but there are accounting considerations for both lessees and lessors to consider. A new EY publication examines how IFRS 16 Leases applies to rent concessions and discusses a recent amendment issued by the International Accounting Standards Board.

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