IAS 20

IAS 20 Government Grants

 

Overview:

IAS 20 prescribes the accounting treatment of various government grants and other form of government assistance together with related disclosure requirements.

DEFINITION

Government grants:

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 the entity

Exclude forms of government assistance which cannot reasonably have a value placed on them and which cannot be distinguished from the normal trading transactions of the entity.

 

SCOPE

The standard does not deal with:

Government assistance that is provided for an entity in the form of benefits that are available in determining taxable income or are determined or limited to the basis of income tax liability

Government participation in the ownership of an entity

Government grants covered by IAS 41 Agriculture

 

TYPES OF GOVERNMENT GRANTS

 

GRANTS RELATED TO INCOME

A grant receivable as compensation for costs, either:

Already incurred

For immediate financial support, with no future related costs.

 

Recognise as income in the period in which it is receivable.

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

Separately as ‘other income’

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 when related expenditure impacts profit or loss)

By deducting the grant from the asset’s carrying amount

 

NON-MONETARY GRANTS

Non-monetary grants, such as land or other resources, are usually accounted for at fair value, although recording both the asset and the grant at a nominal amount is permitted

 

RECOGNITION OF GRANTS

Grants are recognised when both:

There is reasonable assurance the entity will comply with the conditions attached to the grant

The grant will be received.

 

The grant is recognised as income over the period necessary to match it with the related costs, for which it is intended to compensate on a systematic basis and should not be credited directly to equity.

DISCLOSURE

Accounting policy adopted for grants, including method of statement of financial position presentation

Nature and extent of grants recognised in the financial statements

An indication of other forms of government assistance from which the entity has directly benefited

Unfulfilled conditions and contingencies attaching to recognised grants.