IAS 20 - Government Grants

Question 1

for what years are capital government grants recognised

Answer 1

the periods for which depreciation is charged on the asset

Question 2

what to look for when there is a revenue grant

Answer 2

is there terms and conditions

Question 3

how to account for a revenue grant with no terms and conidtions

Answer 3

DR Bank
CR SPL (other income)

recongise immediately

Question 4

how to account for a revenue grant that has terms and conditions

Answer 4

DR bank
CR Deferred income

after first year (or whenever, depending on condition)
DR Deferred income
CR other income (SPL)

Question 5

what are the two methods for recognisiing capital grants

Answer 5

treat as deferred income

deduct grant from asset carrying amount (so reduced amount to depreciate)

Question 6

why is the second method for accounting for capital grants not allowed in UK and IRE

Answer 6

legislation requires non current assets to be stated at purchase price

Question 7

why are revenue grants with conditions not recognised until conditions are met and there is reasonable assurance that the grant will be received

Answer 7

prudence

Question 8

how to account for a capital grant that goes directly to the seller

Answer 8

we do not have to account for that as will be accounted for in vendor

Question 9

at what rate is a grant fed in

Answer 9

same rate as asset is being depreciated