Ch.16 Government assistance Flashcards
Recognition
All grants are recognized when there is reasonable assurance of two criteria:
1. The entity will comply with the conditions attached to the grant -Receipt of a grant does provide evidence that the conditions of the grant have been or will be fulfilled
grant does not meet the first criterion above, it is recorded as a liability (deferred government grant). The liability is reduced as the conditions are met
2. The grant will be received.
Grants Related to Income
provides resources to cover expenses, such as a grant for salaries and wages. The grant is recognized as the related expense is incurred
presented in one of the 2 ways
• separately as “other income”; or
• deducted from the related expense (a credit to the expense account)
Grants Related to Assets
provides resources to cover the purchase of an asset(s), such as a grant to purchase a piece of equipment.
income over the period necessary to match it with the related costs for which it is intended to compensate
presented in one of two ways:
• as deferred income (a liability), and brought into income over the life of the asset as depreciation is incurred
o In the case of a non-depreciable asset, the grant is likely to carry conditions with it. The grant would be recognized over the period in which those conditions are met.
• deducted from the asset’s carrying amount
Government loans
a forgivable government loan is treated as a government grant provided the same recognition criteria as above are met
government loan with favorable interest= any benefit derived from the loan is treated as a government grant.
Non-monetary grants
government may contribute land or other resources. If this is the case, the entity has the option to recognize the grant at fair value or at a nominal amount
Disclosures
IAS 20
provide the following disclosures:
• method of presentation
• nature and extent of amounts recognized and benefits received
• unfulfilled conditions and outstanding contingencies
ASPE Differences
non-monetary grants are recorded at fair value. There is no option to record them at a nominal 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 to be recognized into income whereas ASPE takes a prospective approach and does not require a cumulative adjustment for the additional depreciation.