Government Grants & Disclosure of Government Assistance

Question 1

What are Government Grants/Assistance?

Answer 1

Action by gov to provide specific economic benefit to entity/entities under certain criteria.
Tax relief, tax breaks, incentives, or transfer of resources.

Question 2

What is the Government Grant/Assistance IAS 20 Accounting Treatment?

Answer 2

IAS 20 requires grants to be recognised as income over a period against which relevant costs occur. Recognise when reasonable assurance that entity will:
* Comply with any conditions attached to grant
* Actually, receive grant

Question 3

What is Capital Grant?

Answer 3

Recognise grant for the acquisition of an asset when calculating profit/loss for period in periods where depreciation is charged on asset.

Question 4

What are 2 Ways Capital Grants are Recognised by IAS 20?

Answer 4

Deferred Income Approach
Capital/Reduced Asset Approach

Question 5

What is the Deferred Income Approach?

Answer 5

Recognises capital grants.
Grant credited to deferred income account & systematically transferred to IS over useful life of asset.

Question 6

How are Government Grants Related to Income Repaid?

Answer 6

1. Against any unamortised credit, set up in relation to grant
2. Recognise remainder immediately as an expense

Question 6

What is the Capital/Reduced Asset Approach?

Answer 6

Recognises capital grants.
Grant deducted from carrying amounts of asset. Results in reduced depreciation charges over asset’s useful life.

Question 7

How are Government Grants Related to Asset Repaid?

Answer 7

• Increase carrying amount of asset (capital approach)
• Reduce deferred income balance by amount repayable (income approach).

Question 7

What Disclosure of Government Grants is Required?

Answer 7

• Which policy adopted for gov grant & method of presentation used in FS.
• Other gov assistance entity has directly benefitted from
• Unfulfilled conditions attached to gov grant recognised in FS
• Nature & extent of gov grants recognised in FS