7/27/2019 IAS 20 Government Grants

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Government Grants are:

•  Assistance by government.• In the form of transfers of resources to an entity.• In return for past or future compliance with certain

conditions relating to the operating activities of theentity.

• They exclude those forms of government assistance

 which cannot reasonably have a value placed on themand which cannot be distinguished from the normaltrading transactions of the entity.

Exclusions:• Government assistance that is provided for an entity in

the form of benefits that are available in determiningtaxable income or are determined or limited to the basisof income tax liability.

• Government participation in the ownership of an entity.• Government grants covered by IAS 41 – Agriculture.

Types of Grants:1. Grants related to income2.Grants related to assets

Grants related to income A grant receivable as compensation for costs:

•  Already incurred; or• For immediate financial support, with no future related

costs.Should be recognized as income in the period in which it isreceivable.

 A grant relating to income may be presented in one of two ways:• Separately as ‘other income’; or

• Deducted from the related expense.

Grants related to assets

 A grant relating to assets may be presented in one of two ways:

•  As deferred income (and released to profit or loss whenrelated expenditure impacts profit or loss); or

• By deducting the grant from the asset’s carrying amount.

Non-cash grantsGovernment assistance received which is not cash should

 be recognized at the fair value of the benefit received.

RecognitionGrants are recognized when there is reasonable assurancethat:

• The entity will comply with the conditions attached tothe grant; and• The grant will be received.

The grant is recognized as income over the periodnecessary to match it with the related costs, for which it isintended to compensate on a systematic basis and shouldNOT be credited directly to equity.

If a grant becomes repayable, it should be treated as therevision of an accounting estimate.

Disclosures

•  Accounting policy adopted for grants, including methodof presentation in the Statement of Financial Position.

• Nature and extent of grants recognized in the financialstatements.

• Unfulfilled conditions and contingencies attaching torecognized grants.

•  Any government assistance whose value cannot bemeasured reliably (such as technical or marketingadvice)

•  Additional disclosure is required for profit-orientedentities.

IAS 20 - Government Grants

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