Government Assistance

Question 1

Grants are recognized when there is reasonable assurance of two criteria:

Answer 1

• The entity will comply with the conditions attached to the grant, and
• The grant will be received.

Question 2

Grants relating to income

Answer 2

A grant that provides resources to cover expenses

Recognized as the related expense is incurred.

Question 3

Grants relating to income

Presentation - 2 ways

Answer 3

1. Separately as “other income - govt grant”
2. deducted from the related expense (CR expense)

Question 4

Grants relating to assets

Answer 4

A grant that provides resources to cover the purchase of an asset

Recognized as income over the period necessary to match it with the related costs for which it is intended to compensate (depreciation of the asset)

Question 5

Grants relating to assets (presentation)

Answer 5

1. Deferred income (liability), brought into income over the life of the asset as depreciation is incurred
2. Deducted from the asset’s carrying amount.

Question 6

Forgivable gov’t loans

Answer 6

Treated the same way as gov’t grants if recognition criteria are met.

Question 7

Non-monetary grants

Ex. Govt contributes land

Answer 7

Has the option to recognize the grant at FMV or a nominal amount.

ASPE - no option, has to recognize at FMV.

Question 8

Possible repayment - operating portion

Answer 8

Repayment reflected in the I/S, record liability. - > period in which entity determines the grant is to be repaid.

Question 9

Possible repayment - capital portion

ASPE states the repayment be recorded to match how the grant was originally presented:

Answer 9

1. If cost of fixed assets was reduced:
   
   • Cost of fixed assets is increased by amt of repayment, and depreciation is recorded on this new cost prospectively.
2. If grant was recorded separately as deferred revenue
   
   • The unamortized balance of def revenue is decreased for the repayment and future amortization is based on the new def revenue balance.