U.K.'s Smaller Businesses Must Stick to Lease-Accounting Rules

U.K. national accounting standards used by smaller companies don’t afford the same flexibility in lease accounting during the coronavirus pandemic as international standards, according to new guidance from a leading accounting body.

The Institute of Chartered Accountants in England and Wales said Thursday in a webcast that rental holidays given during the pandemic must be treated as lease modifications for accounting purposes. This requirement is likely to be waved for larger companies using global accounting standards, with the International Accounting Standards Board saying in April that the subsequent recalculation of lease liabilities would be too complex for companies already grappling with pandemic-induced disruption.

• The IASB was looking at how to account for Covid-19 support programs under Financial Reporting Standard 102 and FRS 105, the U.K. national accounting standards used by smaller companies.
• In April, the IASB said that the number of lease rental holidays being granted as companies stop work during the pandemic made it too difficult for firms to record them as lease modifications, as required by International Financial Reporting Standard 16 Leases, and recommended waving the requirement for 2020.
• The key principle for smaller businesses to follow, ICAEW said, is the “one adage that is agreed on: if unsure, disclose some more.”