Ch. 16 Government Assistance Flashcards
IAS 20
ASPE 3800
IAS 20
ASPE 3800
What are the two types of government grants?
Grants related to income, grants related to assets
What are two ways that grants that are related to income recorded?
1) As Other income
2) To offset an expense
What are two ways that grants related to asset purchases are recorded?
1) Deferred Liability
2) Offset the asset
When would you use Other Income or deferred liability as to the method of record?
Grants often income with obligations. Receipt of a grant provides the conditions that the grant has been or will be fulfilled, but they also must still have reasonable assurance that they will comply with any conditions in order to recognize it as income.
If it does not meet the conditions - it will be recorded as a liability.
If a grant is received, and it is related to costs incurred in a previous period, there are no future costs associated with it, the grant is recognized in the period in which it becomes receivable.
How are forgivable government loans treated?
They’re treated as a government grant and is met with the same criteria as above. If there is reasonable assurance that the entity will meet the terms for the forgiveness of the loan.
How about government loans with favorable terms?
The benefit to the entity is the proceeds of the loan less the discounted value using the effective interest method. The benefit derived from the loan is treated as a government grant.
How are non-monetary grants treated?
The entity has the option to recognize the grant at fair value or at a nominal value. Once the value is determined, the recognition follows the same guidelines above.
IAS 20 Required disclosures
Method of presentation, nature, and extent of amounts recognized and benefits received, unfulfilled conditions and outstanding contingencies
What are the ASPE differences
non-monetary grants are recorded at fair value vs nominal or fair value.
Grants related to assets that become repayable. IFRS requires that the cumulative effect of the additional depreciation related to the repayable portion of the grant is recognized in income, but ASPE requires no cumulative adjustment to additional depreciation (prospective approach)
