8. Government Grants Flashcards
Government grants: Conditions when they should be recognized?
- Will comply with conditions
- Will receive grant
Government grants: When is revenue recognized?
Over the periods the related costs are incurred
Government grants: How can they be presented?
Either
- Credit in P&L
- Deducted from related expense
Government grants: Capital grants: 2 methods of recognition
- Netting-off method
- Deferred income method
Government grants: Capital grants: Netting-off method
- Write off grant against
Cost of non-current asset - Depreciate the reduced cost
Government grants: Capital grant: Deferred income method
Treat grant as deferred income
So transfer portion to P&L annually over UL
(So offsetting higher depn on original cost)
Government grants: Revenue grant: Repayment treatment (if conditions broken)
(Reduce deferred income)
Recognize balance as expense
Government grants: Capital grant: Repayment treatment (if conditions broken): Netting-off method
Increase carrying amount of asset by repayment amount
Recognize missed cumulative depn
Government grants: Capital grant: Repayment treatment (of conditions broken): Deferred income method
Reduce D.E. by repayment amount
Recognize repayment balance immediately as P&L expense
Government grants: Government Assistance: Treatment
e.g. free advice
provision of guarantees
Not quantified/recognized in FS
IF no practical way to place reasonable value on it
Government grants: UK GAAP presentation: 2 options
- Performance model
- Accruals model
(On a class-by-class basis)
Government grants: UK GAAP: Performance model: Performance-related conditions do apply
Recognized as income when conditions met
Government grants: UK GAAP: Performance model: Performance-related conditions do not apply
Recognized when proceeds received/receivable
Government grants: UK GAAP: Performance model: Received before income can be recognized
Liability
Government grants: UK GAAP: Accruals model
Classified as relating to revenue of assets
Government grants: UK GAAP: Treatment when relating to revenue: Future related costs
Over periods in which related costs incurred
Government grants: UK GAAP: Treatment when relating to revenue: No future related costs
Recognized in period grant becomes receivable
Government grants: UK GAAP: Treatment when relating to assets
Recognized as income over expected UL of asset
Any part of grant not recognized as income is recognized as deferred income
(Not offset against carrying amount of asset)
