Accounting Standard AASB 2021-3 Amendments to Australian Accounting Standards – Covid-19-Related Rent Concessions beyond 30 June 2021

Administered by Department of the Treasury

Legislation au F2021L00545 Not in force Legislative Instrument

Legislation content

Explanatory Statement

Accounting Standard AASB 2021-3
Amendments to Australian Accounting Standards –
Covid-19-Related Rent Concessions beyond 30 June 2021

 

April 2021

EXPLANATORY STATEMENT

Standards Amended by AASB 2021-3

This Standard makes amendments to AASB 16 Leases (February 2016).

These amendments arise from the issuance of International Financial Reporting Standard Covid-19-Related Rent Concessions beyond 30 June 2021 (Amendment to IFRS 16) by the International Accounting Standards Board (IASB) in March 2021.

Marked-up Text

This Standard incorporates marked-up text to clearly identify some of the amendments to AASB 16. All amendments are incorporated using clean text into the compilations of those Standards when they are prepared, based on the legal commencement date of the amendments.

Power to Make Amendments

Under subsection 33(3) of the Acts Interpretation Act 1901, where an Act confers a power to make, grant or issue any instrument of a legislative or administrative character (including rules, regulations or by-laws), the power shall be construed as including a power exercisable in the like manner and subject to the like conditions (if any) to repeal, rescind, revoke, amend, or vary any such instrument.  Accordingly, the AASB has the power to amend the Accounting Standards that are made by the AASB as legislative instruments under the Corporations Act 2001.

Main Features of AASB 2021-3

Main Requirements

This Standard amends AASB 16 to extend by one year the application period of the practical expedient added to AASB 16 by AASB 2020-4 Amendments to Australian Accounting Standards – Covid-19-Related Rent Concessions.  The practical expedient permits lessees not to assess whether rent concessions that occur as a direct consequence of the covid-19 pandemic and meet specified conditions are lease modifications and, instead, to account for those rent concessions as if they were not lease modifications.  This Standard extends the practical expedient to rent concessions that reduce only lease payments originally due on or before 30 June 2022, provided the other conditions for applying the practical expedient are met.

Application Date

AASB 2021-3 applies to annual reporting periods beginning on or after 1 April 2021. The amendments may be applied early, including in financial statements not authorised for issue at the date AASB 2021-3 was issued.

References to Other AASB Standards

References in this Standard to the titles of other AASB Standards that are legislative instruments are to be construed as references to those other Standards as originally made and as amended from time to time and incorporate provisions of those Standards as in force from time to time.

Consultation Prior to Issuing this Standard

The AASB issued Exposure Draft ED 308 Covid-19-Related Rent Concessions beyond 30 June 2021 in February 2021 for comment by 22 February 2021. ED 308 incorporated IASB Exposure Draft ED/2021/2 Covid-19-Related Rent Concessions beyond 30 June 2021. No comment letters were received by the AASB relating to ED 308. The AASB did not make a submission to the IASB on ED/2021/2.

The IASB analysed the feedback it received on the proposed amendments and decided to finalise the amendments after making some minor changes, including highlighting in paragraph C20BC that a lessee that had already applied the practical expedient in paragraph 46A would be required to apply the extended scope of the practical expedient to eligible contracts with similar characteristics and in similar circumstances. The IASB set an effective date for the amendments of annual periods beginning on or after 1 April 2021, with earlier application permitted, including in financial statements not authorised for issue at the date the Standard was issued. The AASB considered and adopted the amendments made by the IASB to IFRS Standards in finalising AASB 2021-3 and the amendments to the Australian Accounting Standards.

A Regulation Impact Statement (RIS) has not been prepared in connection with the issue of AASB 2021-3 as the amendments made do not have a substantial direct or indirect impact on business or competition.

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the
Human Rights (Parliamentary Scrutiny) Act 2011

Accounting Standard AASB 2021-3
Amendments to Australian Accounting Standards –
Covid-19-Related Rent Concessions beyond 30 June 2021

Overview of the Accounting Standard

This Standard makes amendments to AASB 16 Leases (February 2016).

These amendments arise from the issuance of International Financial Reporting Standard Covid-19-Related Rent Concessions beyond 30 June 2021 (Amendment to IFRS 16) by the International Accounting Standards Board (IASB) in March 2021.

This Standard amends AASB 16 to extend by one year the application period of the practical expedient added to AASB 16 by AASB 2020-4 Amendments to Australian Accounting Standards – Covid-19-Related Rent Concessions.  The practical expedient permits lessees not to assess whether rent concessions that occur as a direct consequence of the covid-19 pandemic and meet specified conditions are lease modifications and, instead, to account for those rent concessions as if they were not lease modifications.  This Standard extends the practical expedient to rent concessions that reduce only lease payments originally due on or before 30 June 2022, provided the other conditions for applying the practical expedient are met.

Human Rights Implications

This Standard is issued by the AASB in furtherance of the objective of facilitating the Australian economy.  It does not diminish or limit any of the applicable human rights or freedoms, and thus does not raise any human rights issues.

Conclusion

This Standard is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

 

Overview

The Accounting Standard AASB 2021-3, enacted in April 2021, amends AASB 16 Leases to extend the practical expedient for Covid-19-related rent concessions by one year. This Standard was introduced in response to the continuing impact of the COVID-19 pandemic on financial reporting and aims to provide relief to lessees who have been significantly affected by the pandemic. Enacted by the Australian Accounting Standards Board (AASB), the amendments allow lessees to account for certain rent concessions as if they were not lease modifications, provided they meet the specified conditions. The AASB has the power to make these amendments under subsection 33(3) of the Acts Interpretation Act 1901. The amendments apply to annual reporting periods beginning on or after 1 April 2021, with early application permitted, including in financial statements not yet authorised for issue at the date the Standard was issued.

Scope and Application

Accounting Standard AASB 2021-3 Amendments to Australian Accounting Standards – Covid-19-Related Rent Concessions beyond 30 June 2021 applies to entities that prepare financial statements in accordance with Australian Accounting Standards, particularly those governed by AASB 16 Leases. The amendments extend the application period of a practical expedient related to accounting for rent concessions due to the COVID-19 pandemic, allowing lessees to treat certain rent concessions as if they were not lease modifications. This applies to annual reporting periods beginning on or after 1 April 2021, with the option for early application. The Standard does not specify any exclusions or exemptions but follows the conditions set forth in the original AASB 2020-4. The AASB has the authority to amend Accounting Standards under the Corporations Act 2001, and this amendment reflects the corresponding changes made by the International Accounting Standards Board to IFRS 16. No substantial direct or indirect impact on business or competition has been identified, and the Standard is compatible with human rights as it does not diminish any applicable rights or freedoms.

Key Provisions

AASB 2021-3 introduces amendments to AASB 16 Leases (February 2016) in response to the ongoing impact of the COVID-19 pandemic. Specifically, the amendments extend the application period of a practical expedient introduced by AASB 2020-4 (paragraphs 46A and 46B). This practical expedient allows lessees to bypass the assessment of whether rent concessions resulting from the COVID-19 pandemic qualify as lease modifications, permitting them to treat these concessions as if they were not modifications (section 1). This extension applies to rent concessions that reduce lease payments due on or before 30 June 2022, provided all other conditions for applying the practical expedient are met (section 2). The obligations imposed by AASB 2021-3 primarily concern lessees who must now account for eligible COVID-19-related rent concessions in a simplified manner. Lessee entities must ensure that any rent concessions due on or before 30 June 2022, and which are a direct consequence of the pandemic, meet the specified conditions to qualify for the practical expedient. These conditions include the nature of the rent concessions, the impact of COVID-19, and other criteria outlined in AASB 2020-4 and now extended by AASB 2021-3 (section 3). The amendments can be applied to financial statements of annual reporting periods beginning on or after 1 April 2021, with early application permitted (section 4). Non-compliance with the provisions of AASB 2021-3 does not explicitly prescribe specific penalties or consequences. However, failure to adhere to the accounting standards set by AASB may result in broader regulatory scrutiny and potential financial restatements or penalties under the Corporations Act 2001. It is crucial for entities to ensure that their financial statements comply with all applicable accounting standards to avoid potential legal and financial repercussions (section 5).

Legal classification tags

Area of Law
Accounting Law
Instrument
Regulation
Concepts
Definitions & Interpretation
Commencement Provisions
Regulatory Standards

Interactions

Authorises

All Versions

Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.