-
Why Grant Thornton
Whether you’re growing in one market or many, looking to operate more effectively, managing risk and regulation, or realising stakeholder value, our firms can help.
-
Culture and experience
Grant Thornton’s culture is one of our most valuable assets and has steered us in the right direction for more than 100 years.
-
Global scale and capability
Beyond global scale, we embrace what makes each market unique, local understanding on a global scale.
-
Join our network
In a world that wants more options for high quality services, we differentiate in the market to grow sustainably in today’s rapidly changing environment.
-
Leadership governance and quality
Grant Thornton International Ltd acts as the coordinating entity for member firms in the network with a focus on areas such as strategy, risk, quality monitoring and brand.
-
Africa
24 member firms supporting your business.
-
Americas
31 member firms, covering 44 markets and over 20,000 people.
-
Asia-Pacific
19 member firms with nearly 25,000 people to support you.
-
Europe
53 member firms supporting your business.
-
Middle East
8 member firms supporting your business.
-
Business consulting services
Our business consulting services can help you improve your operational performance and productivity, adding value throughout your growth life cycle.
-
Business process solutions
We can help you identify, understand and manage potential risks to safeguard your business and comply with regulatory requirements.
-
Business risk services
The relationship between a company and its auditor has changed. Organisations must understand and manage risk and seek an appropriate balance between risk and opportunities.
-
Cybersecurity
As organisations become increasingly dependent on digital technology, the opportunities for cyber criminals continue to grow.
-
Forensic services
At Grant Thornton, we have a wealth of knowledge in forensic services and can support you with issues such as dispute resolution, fraud and insurance claims.
-
Mergers and acquisitions
We work with entrepreneurial businesses in the mid-market to help them assess the true commercial potential of their planned acquisition and understand how the purchase might serve their longer-term strategic goals.
-
Recovery and reorganisation
Workable solutions to maximise your value and deliver sustainable recovery.
-
Transactional advisory services
We can support you throughout the transaction process – helping achieve the best possible outcome at the point of the transaction and in the longer term.
-
Valuations
We provide a wide range of services to recovery and reorganisation professionals, companies and their stakeholders.
-
IFRS
At Grant Thornton, our IFRS advisers can help you navigate the complexity of financial reporting from IFRS 1 to IFRS 17 and IAS 1 to IAS 41.
-
Audit quality monitoring
Having a robust process of quality control is one of the most effective ways to guarantee we deliver high-quality services to our clients.
-
Global audit technology
Our global assurance technology platform provides the ability to conduct client acceptance, consultations and all assurance and other attestation engagements.
-
Corporate and business tax
Our trusted teams can prepare corporate tax files and ruling requests, support you with deferrals, accounting procedures and legitimate tax benefits.
-
Direct international tax
Our teams have in-depth knowledge of the relationship between domestic and international tax laws.
-
Global mobility services
Through our global organisation of member firms, we support both companies and individuals, providing insightful solutions to minimise the tax burden for both parties.
-
Indirect international tax
Using our finely tuned local knowledge, teams from our global organisation of member firms help you understand and comply with often complex and time-consuming regulations.
-
Transfer pricing
The laws surrounding transfer pricing are becoming ever more complex, as tax affairs of multinational companies are facing scrutiny from media, regulators and the public
-
Africa tax desk
A differentiating solution adapted to the context of your investments in Africa.
-
Banking Holding banking to account: the real diversity and inclusion pictureWe explore how the banking sector can continue to attract, retain and nurture women to build a more diverse and inclusive future.
-
Sustainability From voluntary to mandatory ESG: How banks can future-proof their operationsAs we move from voluntary ESG initiatives to mandatory legislation, we explore what the banking sector needs to prioritise.
-
IFRS IFRS 9 - Audit of Expected Credit LossesGPPC releases The Auditor’s response to the risks of material misstatement posed by estimates of expected credit losses under IFRS 9
-
growthiQ Steering your company to long-term successHistory has something important to tell us about the difficulties of steering a business to long-term success – through seismic shifts in technology, consumer demands and product development. With that in mind it’s unsurprising that over half the world’s largest companies in the early 1900s had shut their doors by the late 1990s. Some, however, have endured.
-
International Financial Reporting Standards Implementation of IFRS 17 ‘Insurance Contracts’The auditor’s response to the risks of material misstatement arising from estimates made in applying IFRS 17 ‘Insurance Contracts’
-
IFRS Get ready for IFRS 17After twenty years of development the IASB has published IFRS 17 ‘Insurance Contracts’, find out more.
-
Global business pulse - industry analysis Mid-market recovery spreads to more industriesThe index results for 13 key industries of the mid-market reveals a very uneven recovery from COVID-19
-
Global business pulse - industry analysis A very uneven recovery across industriesThe index results for 13 key industries of the mid-market reveals a very uneven recovery from COVID-19
-
Global business pulse - Sector analysis Clear patterns of damage from COVID-19 across the industriesThe index results for 12 key sectors of the mid-market reveal just how much or little the various parts of the economy were impacted by COVID-19.
-
Not for profit Mission: possible – putting impact at the heart of charityGlobal charitable continues to decline and charity leaders are increasingly looking at their own unique impact journey.
-
Access to finance Raise finance to invest in changePrepare your business to raise finance to invest in change.
-
Private equity firms Private equity in the mid-market: reshaping strategies for 2021When the global COVID-19 pandemic stormed across the globe in early 2020, the private equity sector was hit hard but deals are coming back to the market.
-
Mid-market businesses Getting ready for private equity investmentOur specialists explore how private equity firms are now working with their portfolios and how the mid-market can benefit from investment.
-
Mid-market businesses Myth-busting private equityNervous about partnering with Private Equity? We explore some of the common myths we come across when speaking to mid-market businesses about PE investment.
-
Public sector Helping build the government of tomorrow, todayLearn about the Grant Thornton US public sector team.
-
Global business pulse - industry analysis Mid-market recovery spreads to more industriesThe index results for 13 key industries of the mid-market reveals a very uneven recovery from COVID-19
-
Global business pulse - industry analysis A very uneven recovery across industriesThe index results for 13 key industries of the mid-market reveals a very uneven recovery from COVID-19
-
Global business pulse - Sector analysis Clear patterns of damage from COVID-19 across the industriesThe index results for 12 key sectors of the mid-market reveal just how much or little the various parts of the economy were impacted by COVID-19.
-
Industries European Real Estate PodcastJessica Patel, Tax Partner at Grant Thornton UK speaks with tax partners and directors across the network to share their insights on the real estate market and some of the challenges.
-
Industries European Real Estate PodcastJessica Patel, Tax Partner at Grant Thornton UK speaks with tax partners and directors across the network to share their insights on the real estate market and some of the challenges.
-
Global business pulse - industry analysis Mid-market recovery spreads to more industriesThe index results for 13 key industries of the mid-market reveals a very uneven recovery from COVID-19
-
Global business pulse - industry analysis A very uneven recovery across industriesThe index results for 13 key industries of the mid-market reveals a very uneven recovery from COVID-19
-
-
Global business pulse - industry analysis Mid-market recovery spreads to more industriesThe index results for 13 key industries of the mid-market reveals a very uneven recovery from COVID-19
-
Global business pulse - industry analysis A very uneven recovery across industriesThe index results for 13 key industries of the mid-market reveals a very uneven recovery from COVID-19
-
Retail How retail is positioning for successCOVID-19 provided some hard lessons for the retail industry. It is time to turn those into sustainable and well executed growth strategies in 2021.
-
Telecoms Can tech and telecom leverage economic headwindsAs most businesses brace for an economic downturn, tech and telecom could see new prospects. But, to turn the headwinds to your advantage, you need to find your unique opportunities and risks.
-
Technology Mid-market tech companies lead the way on diversity and inclusionWe explore how the mid-market tech sector can continue to build and nurture a culture that’s increasingly more diverse and inclusive for women.
-
Technology Responding to slowing growth: why the tech industry faces a more challenging outlook in 2022We spoke to tech experts about industry trends that could affect companies over the next 12 months and what their short-term strategic priorities should be.
-
Tax Resetting global tax rules after the pandemicBusinesses are seeing rising challenges, and finance heads are dealing with a range of new measures. To say the next 12 months are critical for businesses is an understatement.
-
Telecoms Can tech and telecom leverage economic headwindsAs most businesses brace for an economic downturn, tech and telecom could see new prospects. But, to turn the headwinds to your advantage, you need to find your unique opportunities and risks.
-
TMT TMT industry: Fully charged or on standby?Our research revealed five key trends that resonated with Technology, Media and Telecoms (TMT) industry leaders around the world. We asked a panel of our experts from UK, US, India Ireland and Germany, to give us their reaction to the findings.
-
Cybersecurity One size fits nothingTechnology companies must adopt a new approach to digital risk: those that successfully develop a reputation for digital trust by demonstrating an unwavering commitment to cyber security and data privacy will be able to carve out a competitive advantage.
-
Technology, media & telecommunications Why it’s time for a 5G reality checkFigures suggest the mobile sector is maturing. While data usage continues to soar, mobile revenues are expected to flatten out over the next few years.
-
International business Mid-market businesses lifted by rising tide of optimismOptimism among global mid-market business leaders rose to 67% in the first half of this year and they are markedly more optimistic about their prospects with global optimism having increased by 8%.
-
Global business pulse - industry analysis Mid-market recovery spreads to more industriesThe index results for 13 key industries of the mid-market reveals a very uneven recovery from COVID-19
-
Hotels COVID-19: Checking in with the hotel industry one year onCOVID-19 provided some hard lessons for the hotel sector. It is time to turn those into sustainable and well executed growth strategies.
-
Global business pulse - industry analysis A very uneven recovery across industriesThe index results for 13 key industries of the mid-market reveals a very uneven recovery from COVID-19
- By topic
-
Women in Business 2024
2024 marks the 20th year of monitoring and measuring the proportion of women occupying senior management roles around the world.
-
COP28: Mid-market firms should seize the opportunity from adaption and innovation
COP28 was the first time there has been a global stocktake on progress against the Paris Agreement.
-
Scanning the horizon: Mid-market sets sights on global trade growth
The latest International Business Report (IBR) data shows that mid-market businesses have high expectations for global trade.
-
Mid-market businesses less optimistic, despite record numbers expecting increased profitability
A closer examination of the data offers some explanation of this apparent contradiction.
-
Women in tech: A pathway to gender balance in top tech roles
Grant Thornton’s 2024 Women in Business data suggests we are far from achieving parity within the mid-market technology sector.
-
Women in leadership: a pathway to better performance
What makes the benefits of gender parity compelling is the impact it can have on commercial performance.
-
Women in Business 2024
2024 marks the 20th year of monitoring and measuring the proportion of women occupying senior management roles around the world.
-
Women in business: Regional picture
We saw an increase in the percentage of senior management roles held by women, on a global level, but there are some significant regional and country variations.
-
Pathways to Parity: Leading the way
To push towards parity of senior management roles held by women, who leads within an organisation is vital.
-
Generating real change with a long-term focus
The most successful strategy to achieve parity of women in senior management is one which stands alone, independent of an ESG strategy.
-
People at the heart of great business
Businesses have started to put guidelines and incentives in place, focused on driving employees back to the office.
-
Focusing and developing a solid strategy around diversity, equity and inclusion
Grant Thornton Greece is pioneering a growing set of diversity, equity and inclusion (DE&I) initiatives that centre around three strategic pillars.
-
Ten considerations for preparing TCFD climate-related financial disclosures
Insights for organisations preparing to implement the International Sustainability Standards Board (ISSB)’s Standards.
-
COP28: Mid-market firms should seize the opportunity from adaption and innovation
COP28 was the first time there has been a global stocktake on progress against the Paris Agreement.
-
Transition Plan Taskforce publishes its final disclosure framework
As organisations in the private sector make commitments and plans to reach net zero, there's a growing need for stakeholders to be able to assess the credibility of their transition plans.
-
Promoting ESG excellence through tax
ESG considerations have never been more important for an organisation’s long-term success, but how can tax be used to add value to an ESG agenda?
-
International business: Mid-market growth and expansion
The mid-market looks to international business opportunities for growth.
-
Top five constraints to international business in the mid-market
Top five major constraints that are testing the mid-market’s ability to grow their businesses internationally.
-
Brand and international marketing – breaking global barriers
Brand has been identified as a key driver of mid-market success when looking to grow and develop international business.
-
The key to international business: Investing in people
How can recruitment and retention help grow international business?
-
Building resilience in international business
Evolving supply chains and trade patterns amid ongoing global uncertainty.
-
IFRS Alerts
IFRS Alerts covering the latest changes published by the International Accounting Standards Board (IASB).
-
Example Financial Statements
General guidance for preparers of financial statements that supports the commitment to high quality, consistent application of IFRS.
-
Insights into IFRS 2
Insights into IFRS 2 summarises the key areas of the Standard, highlighting aspects that are more difficult to interpret and revisiting the most relevant features that could impact your business.
-
IFRS 3
Mergers and acquisitions are becoming more common as entities aim to achieve their growth objectives. IFRS 3 ‘Business Combinations’ contains the requirements for these transactions.
-
IFRS 8
Our ‘Insights into IFRS 8’ series considers some key implementation issues and includes interpretational guidance in certain problematic areas.
-
IFRS 16
Are you ready for IFRS 16? This series of insights will help you prepare.
-
IAS 36
Insights into IAS 36 provides assistance for preparers of financial statements and help where confusion has been seen in practice.
-
IFRS 17
Explaining the key features of the Standard and providing insights into its application and impact.
-
Pillar 2
Key updates and support for the global implementation of Pillar 2.
-
Global expatriate tax guide
Growing businesses that send their greatest assets – their people – overseas to work can face certain tax burdens, our global guide highlights the common tax rates and issues.
-
International indirect tax guide
Navigating the global VAT, GST and sales tax landscape.
-
Global transfer pricing guide
Helping you easily find everything you need to know about the rules and regulations regarding transfer pricing and Country by Country reporting for every country you do business with.
The COVID-19 pandemic is requiring those responsible for the preparation of financial statements to reconsider whether assumptions and assessments previously made are still valid and appropriate which in turn is creating an additional burden on entities all over the world. In particular, IFRS 16 has become an area of focus for entities and the International Accounting Standards Board (IASB). Lessors are providing lessees with rent concessions. These can be in the form of rent holidays or rent reductions for an agreed timeframe (possibly followed by increased rentals in future periods).
In response to this, the IASB has therefore added a practical expedient to provide relief for lessees from lease modification accounting for rent concessions related to COVID-19. This article explains the current accounting requirements, the practical expedient and how to apply it.
Download COVID-19 accounting for lease modifications
In some jurisdictions, governments are making rent concessions a requirement. In others they are merely encouraging them. The financial effect of these concessions may have a material impact on the financial statements for some lessees, particularly in the retail and hospitality industries which in many cases have been forced to temporarily close their premises.
IFRS 16 contains specific requirements on accounting for lease modifications. Rent concessions that change the overall consideration for the lease are in the scope of these requirements. Lessees are required to assess whether rent concessions are lease modifications and, if they are, apply specific accounting guidance. This can be burdensome, especially for large portfolios of leases that may have different features as well as receiving alternative rent concessions from landlords. Entities already have significant pressures upon them as a result of this pandemic and what is set out in IFRS 16 just adds to the burden.
RetailCo closed its stores on 15 March 2020. Economic and regulatory circumstances changed on 30 June 2020 such that RetailCo wished to reopen its stores, however the significant period of time with no cash inflow resulted in insufficient working capital to meet its lease obligations.
On 1 April 2020, RetailCo received a 6-month lease abatement from its landlord, starting 1 April and expiring 30 September 2020. RetailCo’s incremental borrowing rate was 4% at lease inception; it is now 6% because its credit rating has fallen. Payments were CU1,000 per month, expiring in 30 June 2021. Renegotiated payments remain consistent. Payments are in arrears.
At 1 April 2020, the balance of the right-of-use asset was CU15,000. The Liability balance was CU14,607.
Decrease in lease liability > right-of-use asset
If the right-of-use asset had been CU5,000 at the date of modification, the decrease of CU5,828 is more than the right-of-use asset. In such a case, a gain is recognised:
The practical expedient
The practical expedient avoids the need for lessees to carry out an assessment to decide whether a COVID-19-related rent concession received is a lease modification or not. The lessee accounts for the rent concession as if the change was not a lease modification. However, there are no changes for lessors.
The practical expedient is only applicable to rent concessions provided as a direct result of the COVID-19 pandemic. In addition, the relief is only for lessees that are granted these rent concessions. All of the following conditions in relation to permitting a lessee to apply the practical expedient need to be met:
- the rent concession provides relief to payments that overall results in the consideration for the lease contract being substantially the same or less than the original consideration for the lease immediately before the concession was provided
- the rent concession is for relief for payments that were originally due on or before 30 June 2021. So payments included are those that are reduced or deferred on or before 30 June 2021, but any subsequent rental increases can go beyond 30 June 2021
- there are no other substantive changes to the other terms and conditions of the lease.
Lessees are not required to apply the practical expedient it is optional. They are also not required to apply the practical expedient to all leases that are eligible for application. They are however, required to apply it to leases with similar characteristics and in similar circumstances. When identifying such lease contracts, different approaches may be acceptable. For example, the entity may apply the practical expedient based on the class of underlying asset. This could involve applying the practical expedient to leased property, but not leased equipment. Another approach could be to apply the practical expedient based on the type of rent concession received. For example, the entity may choose to apply the practical expedient to rent concessions that relate to rent forgiveness but apply lease modification accounting to any other type of lease concession. If the entity chooses to apply the practical expedient to some but not all lease contracts then additional disclosure will be required, see below.
Disclosure
If applying the practical expedient, the amendments require the entity to disclose:
- that it has applied the practical expedient to all its rent concessions, or if only some of them, a description of the nature of the contract it has applied the practical expedient to, and
- the amount in profit or loss for the reporting period that reflects the change in lease payments arising from rent concessions (as a result of applying the practical expedient).
Effective date
The amendment is applicable for reporting periods beginning on or after 1 June 2020. Earlier application will be permitted, including for financial statements not yet authorised for issue at 28 May 2020 (the date the amendment was issued).
IFRS as endorsed by the EU
However, the amendment cannot be adopted by entities applying EU-adopted IFRS until it has been endorsed for use in Europe. At the time of writing, EU endorsement is expected to be in September 2020. In some instances this may be too late for entities wishing to take advantage of the amendment in the preparation of interim financial statements in accordance with IAS 34 that will be approved for issue prior to the date of EU endorsement. If interim financial statements are being audited or reviewed we strongly encourage reporting entities to understand well before the financial statements are approved how this situation will be reported on by their assurance provider.
Types of concessions applying the practical expedient
Some practical examples of where the practical expedient might be used:
Type of concession | Description |
Deferral of lease payments |
Lessors allow lessees to defer making their lease payments until a later date, lowering the payments in one period and then increasing them in future periods. A concession that simply defers rentals payments to a later date is not necessarily a modification based on the IASB’s recent education guidance. The changes in the practical expedient are however still useful as they avoid the lessee having to assess whether or not modification accounting applies. |
Forgiven lease payments | Lessors providing rent free periods or rent holidays with no other changes to the lease and no requirement to repay these amounts at a later date. |
Partial deferral and forgiveness of lease payments | Lessors allow lessees to defer some lease payments as well as giving them a rent-free period. |
Scenario
A lessee enters into a five-year lease agreement on 1 January 2019, the monthly payments are CU1,000. The business of the lessee is significantly impacted by COVID-19 and so the lessor agrees to provide a rent concession. On 1 May 2020, the lessor agrees to forgive six months of payments unconditionally in 2020 with no adjustment to future rentals. Assume interest accrues using an incremental borrowing rate of 5% (calculated on a daily basis). Monthly depreciation is CU885.
Analysis
The lessee determines the practical expedient can be applied. As the concession is unconditional, it is accounted for on 1 May 2020 as this is the date that triggers the event. The lessee accounts for this concession as a negative variable lease payment.
Original schedule of lease payments
The journal entries before the concession are as follows:
Amended schedule of lease payments
The journal entries accounting for the concession are:
Note 1 – In our view, the presentation of the credit within profit or loss aligns more closely with how variable lease payments should be accounted for. However, we recognise there is an argument to present the credit as a financial item, as ‘debt forgiveness’. So long as it is appropriately disclosed in the financial statements either treatment would be acceptable.
Note 2 – The incremental borrowing rate used to measure the interest on the lease liability should remain unchanged. After accounting for the rent concession, the lessee’s lease liability represents all future payments owing to the lessor discounted at the lessee’s incremental borrowing rate.
Scenario
The scenario for this example is the same as example above except the concession is conditional on whether the country is still in lockdown at the beginning of the month when the rent is due.
Analysis
In which case the journal representing the forgiveness of the lease payments is amended to a monthly journal as follows:
This is because the date that triggers the accounting is the first of every month the concession is offered. The interest charged for those months of the concession would be impacted and should be re-calculated accordingly.
Scenario
A lessee enters into a two-year lease agreement on 1 January 2020, the monthly payments are CU1,000. The business of the lessee is significantly impacted by COVID-19 and so the lessor agrees to provide an unconditional rent concession. On 1 July 2020, the lessor agrees to defer three months of payments in 2020. In this example we have assumed interest accrues using an incremental borrowing rate of 5% (calculated on a daily basis).
Original schedule of lease payments
The lessee determines that as the rent concession is a direct consequence of COVID-19, the practical expedient can be applied. Because the rent payable has been deferred and not forgiven a negative variable lease payment is not accounted for. Instead, the lessee remeasures the present value of the lease liability using the original discount rate of 5% (which remains unchanged). The lessee then recognises the impact of the change in the present value of the lease liability in profit or loss when the rent concession becomes effective. After the deferral period, the payments increase to CU1,200 for the remaining lease term.
Amended schedule of lease payments
Representing the impact of remeasuring the lease liability. At 1 July 2020 the lease liability is remeasured to CU17,208.70, which is the present value of the remaining 15 lease payments, discounted at 5% (which is the lessees unchanged discount rate).
How Grant Thornton can help
Preparers of financial statements will need to be agile and responsive as the situation unfolds. Having access to experts, insights and accurate information as quickly as possible is critical – but your resources may be stretched at this time. We can support you as you navigate through accounting for the impacts of COVID-19 on your business.
Now more than ever the need for businesses, their auditors and any other accounting advisors to work closely together is essential. If you would like to discuss any of the points raised, please speak to your usual Grant Thornton contact or your local member firm.