The Financial Reporting Council (FRC) has issued amendments to FRS 102 and FRS 105 – Covid-19-related rent concessions beyond 30 June 2021


To help them through the pandemic, many businesses that lease property have been supported by their landlords and have been granted rent concessions.

Before the pandemic, FRS 102 and FRS105 didn’t explicitly specify how to account for changes in lease payments resulting from rent concessions. In order to avoid businesses interpreting FRS 102 in different ways, the FRC acted fast and issued an amendment to the standards in October 2020 looking specifically at COVID-19 related rent concessions.

Prior to this amendment, businesses may have looked to treat these rent concessions in the same way as lease incentives, such as rent-free periods at the beginning of a lease, and spread the benefit over the remaining life of the lease.

This amendment changes this treatment. These concessions were specifically to help businesses out during the pandemic period, and are temporary in nature, and so should be recognised in the P&L in the period that the concession is intended to compensate – so effectively you recognise the reduction in the rent charge as it happens.

There are certain conditions to apply this treatment

  • the change has to be a reduction in rent
  • there has to be no other change to the terms of the lease – otherwise the rent concession could be due to those changes rather than just COVID-19
  • the original amendment only applies to payments which were due on or before 30 June 2021. However, in June 2021, the FRC issued further amendments to the standards, such that the revised requirements now apply to rent concessions that reduce lease payments originally due on or before 30 June 2022.

The revised standards require disclosure of the change in lease payments in the financial statements.

The effective date is periods commencing on or after 1 January 2020, but early application is permitted, and Hawsons would recommend that such early application is adopted.

Here is a link to a video of our Technical Director Paul Hutchings discussing the revision to the standards.

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Craig Burton Partner

Craig Burton

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