The Government of Canada introduced the Canada Emergency Commercial Rent Assistance (CECRA) program for small businesses in 2020 to provide relief for small businesses experiencing financial hardship due to COVID-19.

The program enables qualifying property owners that negotiate with qualifying small business tenants to reduce rent for the months of April to September. To qualify for CECRA for small businesses, the commercial property owner must enter (or have already entered) into a legally binding rent reduction agreement to reduce the impacted small business tenant’s rent by at least 75% for the period to which CECRA applies. The landlord forgives at least 25% of the original rent, while the government funds the remaining 50% of the original rent. Full details are available on the CECRA site.

This “In depth” addresses the accounting implications of the program from the perspective of the lessor.

In our view:

● The CECRA assistance is accounted for as a government grant under IAS 20;

● The impact of the government grant is dependent on whether the lessor or the lessee is determined to be the recipient;

● The amount forgiven by the lessor is accounted for either under IFRS 16 as a lease modification or under IFRS 9 as a derecognition of a financial instrument depending on the facts and circumstances of the arrangement.

Changes to the program or new arrangements introduced by governments or lessors may result in a different analysis.