L9/10: Revenue from Customers & Govt. Grants

Question 1

What is the five-step method to recognise revenue from customers?

Answer 1

1. Identify the contract with the customer
2. Identify the separate performance obligations
3. Determine the transaction price
4. Allocate the transaction price to the performance obligations
5. Recognise revenue when (or as) a performance obligation is satisfied

Question 2

What is a government grant?

Answer 2

Assistance by government in the form of transfer of resources to an entity in return for past or future compliance with certain conditions relating to the operating activities of the entity.

Question 3

What are the types of Govt. grants that can be given?.

Answer 3

Capital grant. (Help with asset)

Revenue grant. (Support with operating expenses)

Question 4

What is the technical term for Government grants under IAS?

Answer 4

IAS 20 Accounting for Government Grants and Disclosure of Government Assistance

Question 5

What does IAS 20 require when it comes to Govt grants?

Answer 5

requires that grants are recognised as income, on a systematic basis, over the periods against which the relevant costs occur.

Question 6

What are the two approaches allowed under IAS20 for cashing in the grant?

Answer 6

Deferred income approach -

• The grant may be credited to a DI account and then systematically transferred to the statement of comprehensive income over the useful life of the asset

or

Reduced Asset Approach -

• The grant may be deducted from the carrying amount of the asset. This will result in reduced depreciation charges over the asset’s useful life