IAS 20 government grants

Question 1

government grants

Answer 1

are transfers of resources to an entity in return for past or future compliance with certain condition. (they exclude govt assistance that cannot be valued and normal trade with govt)

Question 2

government assistance

Answer 2

is government action designed to provide an economic benefit to a specific entity. it does not include indirect help such as infrastructure development

Question 3

recognition

Answer 3

govt grants should not be recognised until the conditions have been complied with and there is reasonable assurance that the grant will be received.
* income grants given to subsidise expenditure should be matched to the related costs
* income grants given to hep achieve a non-financial goal should be matched to the costs incurred to meet that goal

Question 4

presentation of grants related to income

Answer 4

• presented as a credit in the statement of profit or loss/
• deducted from the related expense

Question 5

presentation of grants related to assets

Answer 5

• deduct the grant from the cost of the asset and depreciate the net cost
• treat the grant as deferred income and release to profit or loss over the life of the asset

Question 6

repayments of govt grants

Answer 6

accounted for a revision of an accounting estimate
* income based grant
* capital based grant deducted from cost
* capital based grants treated as deferred income