16 May 2022
Mr. Bruce Mackenzie
Chair of the IFRS Interpretations Committee
International Accounting Standards Board
Columbus Building, 7 Westferry Circus
Canary Wharf, London, E14 4HD
United Kingdom
Comments on the Tentative Agenda Decision Relating toLessor Forgiveness of Lease Payments(IFRS 9 Financial Instruments and IFRS16 Leases)
1.

The Accounting Standards Board of Japan (“the ASBJ” or “we”) welcome theopportunity to comment on the IFRS Interpretation Committee (“the Committee”)’stentative agenda decision relating to “Lessor Forgiveness of Lease Payments (IFRS
9 Financial Instruments and IFRS16 Leases)” in the March 2022 IFRIC Update.

Lessor accounting
2.

We do not support finalising this tentative agenda decision because, in our view, theprinciples and requirements of IFRS 9 and IFRS 16 do not provide an adequate basis
for addressing this issue for the reasons set out below.

We believe that the IASB

should consider adding this issue on its agenda as a standard-setting project inaccordance with paragraph 5.16 of the Due Process Handbook.
(a) With respect to lessor accounting for rent concessions, we believe it is unclear
whether the requirements of IFRS 9 or IFRS 16 take precedence.

This isbecause paragraph 2.1(b)(i) of IFRS 9 states that the derecognition requirementsof IFRS 9 applies to operating lease receivables recognised, whereas paragraph
87 of IFRS 16 requires the lessor to consider the accrued lease payments relating
to the original lease as part of the lease payments for the new lease in the leasemodification.

Therefore, while the tentative agenda decision states that, forforgiven lease payments that the lessor had included in operating lease1

receivables, the derecognition requirements in IFRS 9 should be applied and thus
the receivable should be derecognised, we believe that the lease modification
requirements in IFRS 16 could be read to mean that those requirements apply to
all forgiven lease payments because lease modifications are not qualified in anyway.
(b) The tentative agenda decision states that the forgiven lease payments are not"accrued lease payments relating to the original lease" as stated in paragraph 87of IFRS 16.

However, IFRS16 does not provide detailed guidance on accrued

lease payments, and thus we believe that it is inappropriate to conclude that theforgiven lease payments are not "accrued lease payments".

Accordingly, webelieve that the forgiven lease payments for months 10 through 12 could beconsidered accrued lease payments of the original lease, and thus could beconsidered part of the lease payments for the new lease, by applying therequirements in paragraph 87 of IFRS 16 related to lease modifications.
(c) The tentative agenda decision apparently does not consider rent concessions tobe lease incentives (that is, payments made by the lessor to the lessee that areassociated with the lease, or the reimbursement or assumption by the lessor ofcosts of the lessee.).

However, we believe that rent concessions could beinterpreted as "assumptions by the lessor of costs of the lessee".

Under suchinterpretation, we believe that rent concessions could be accounted for as acomponent of lease payments, given that lease incentives comprise leasepayments.
3.

Regarding the lessor accounting for rent concessions, some constituents in our
jurisdiction support the analysis in the tentative agenda decision, while others argue
that only IFRS 16 should be applied. Accordingly, we believe it is necessary tofully discuss the appropriate accounting treatment.

4.

In addition, some constituents in our jurisdiction have commented that it is unclear
whether the term "forgiveness" used in the tentative agenda means full as well as
partial forgiveness.

Accordingly, we suggest that the agenda decision clarify that"forgiveness" means full as well as partial forgiveness of receivables.
Lessee accounting
5.

We agree with the Committee's recommendation that the IASB consider undertaking
2a narrow-scope standard-setting project to address the lessee’s accounting for rent
concessions described in the submission.

Constituents in our jurisdiction havenoted that there is more than one appropriate accounting treatment to account for thelessee’s rent concessions described in the submission, and we believe it is necessary
to fully discuss the appropriate accounting treatment.
6.

We hope that our comments are helpful for the Committee’s and the IASB’s
consideration in the future. If you have any questions, please feel free to contact us.

Yours sincerely,

Yasunobu Kawanishi
Chair
Accounting Standards Board of Japan

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