Government Assistance

Question 1

2 IFRS requirements to recognize government grants

Answer 1

There is reasonable assurance that:

1. the entity will comply with the conditions attached to the grant
2. the grant will be received

Question 2

Grants related to income

Answer 2

_provides resources to cover expenses eg salary
_recognized as the related expense is incurred
_presented as either “other income” OR credited to the related expense

Question 3

Grants related to assets

Answer 3

_to cover the purchase of an asset eg equipment
_recognized as income over the period necessary to match it with related costs; usually done in line with depreciation
_presented as either deferred income liability OR deducted from the asset’s carrying amount

Question 4

Government loans

Answer 4

_forgivable? Treated as a grant
_repayable with favourable interest terms? Benefit (proceeds less discounted value using effective interest rate) is treated as grant

Question 5

IAS 20 disclosure requirements

Answer 5

_method of presentation
_nature and extent of amounts recognized and benefits received
_unfulfilled conditions and outstanding contingencies

Question 6

non-monetary grants: IFRS vs ASPE

Answer 6

IFRS: choice of fair value or nominal
ASPE: fair value only

Question 7

True or false: A government grant to purchase particular equipment must be recognized as deferred income and recognized on a systematic basis over the useful life of the asset

Answer 7

False. This is one option, not a “must do”. It may also be deducted from the cost of the asset.