Accounting for coronavirus-related rent concessions
Hot Topic | April 2020
Latest edition: Applying ASC 842 to rent concessions arising from COVID-19 and other recent events.
Updated: Lessees are receiving rent concessions from their landlords to lessen the economic burden of temporary closures and other measures resulting from coronavirus (COVID-19) and civil unrest in Hong Kong. KPMG addresses how to account for rent concessions resulting from these events under ASC 842 as a lessee or a lessor.
Applicability
Lessees and lessors receiving rent concessions resulting from coronavirus (COVID-19), the civil unrest in Hong Kong and other unforeseen events.
Relevant dates
| Effective date | Public entities | All other entities |
|---|---|---|
Annual periods – Fiscal years beginning after | December 15, 2018 | December 15, 2020 |
Interim periods – In fiscal years beginning after | December 15, 2018 | December 15, 2021 |
Early adoption allowed in fiscal years beginning after | N/A | Immediately |
Key Impacts:
Accounting for these rent concessions under ASC 842 depends on the enforceable rights and obligations of the parties under the original lease contract.
This includes those arising from the laws of the jurisdiction governing the lease even if not written in the contract, and the nature of any changes agreed by the parties to the terms and conditions of that contract.
- If a rent concession under these circumstances is required by the original lease contract (e.g. by a force majeure clause), the concession will generally be accounted for as a variable lease payment.
- If the lessor is under no obligation to grant a rent concession, the lessor’s agreement to grant one should be accounted for as a lease modification.
Report contents
- Background and key impacts
- Applicability
- Variable lease payments or lease modification?
- Accounting for the rent concession
- Short payment of rent
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ASC 842
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Resource
FASB staff guidance on COVID-19 rent concessions
Updated: KPMG’s Q&As on how to apply the FASB staff’s guidance.
Resource
Lease accounting impacts of the COVID-19 virus
This Hot Topic addresses impacts to companies’ lease accounting from the economic effects of the COVID-19 pandemic.
Leases: Hot Topics
These focused Hot Topics are intended for those with an interest in the detailed application of ASC 842.
Resource
Handbook: Leases
Latest edition: Our in-depth guide to ASC 842 – with Q&As, interpretive guidance and examples.
Leases
Our reporting, guidance and publications relevant to the FASB's new leases standard for lessees and lessors for all industries. KPMG specialists provide an in-depth look at ASC 842 implementation
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