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NON-CURRENT ASSETS II - IAS 20 - GOVERNMENT GRANTS

5 important questions on NON-CURRENT ASSETS II - IAS 20 - GOVERNMENT GRANTS

What is government assistance?

Government assistance is an action by government designed to provide an economic benefit specific to an entity or range of entities qualifying under certain criteria.

What are grants related to assets?

Government grants whose primary condition is that an entity should purchase, construct or otherwise acquire non-current assets.

Explain reasonable assurance relate to government grants

1. The will entity will comply with any conditions attached to the grant
2. The entity will actually receive the grant

What is the accounting treatment of government grants?

Government grants are to be recognised as income over the relevant periods to match them with related costs which they have been received to compensate. Grant should not be be credited directly to equity.

A systematic basis of matching must be used.

How should a government grant repayment be treated?

Should be treated as a revision of an accounting estimated (IAS 8).

Repayment of a grant related to income: apply first against any unamortised deferred income set up in respect of the grant;any excess should be recognised immediately as expense.

Repayment of a grant related to an asset: increase the carrying amount of the asset or reduce the deferred income balance by the amount repayable. The cumulative depreciation that would have been recognised to date in absence of the grant should be immediately recognised as an expense.