Set 2 - FR Chapter 16 Government Assistance Flashcards
All grants are recognized when two criteria are met - what are they?
- the entity will comply with conditions of grant
- the grant will be received
If conditions not yet met, how is the grant recognized?
As a liability - deferred government grant. It is brought into income as conditions are met (or reasonable assurance they will be met).
What are the two types of grants?
Income (cover expenses)
Assets (provide resources to cover purchase of assets and recognized in income on a systematic basis in line with deprecation)
How are income grants presented?
either as ‘other income’
netted against the related expense
Example of entries for expense grants - other income
DR cash CR deferred grant (upon receipt if conditions not yet met)
DR wage expense CR wage payable (if receipt is for employing staff)
DR deferred grant CR other income (when conditions met)
Example of entries for expense grants - deducted from expense
DR cash CR deferred grant (upon receipt if conditions not yet met)
DR wage expense CR wages payable (if condition is to employ staff)
DR deferred grant CR wage expense (when conditions met)
How are assets grants presented?
either as deferred income and brought into income as depreciation is incurred over life of asset
deducted from asset’s carrying amount
Example of entries for asset grant - deferred income
DR asset CR cash (when asset acquired)
DR cash CR deferred grant (when grant received)
DR dep expense CR acc dep (of asset)
DR deferred grant CR other income (over life of asset)
Example of entries for asset grant - deduction from carrying amount
DR asset CR cash (when asset acquired)
DR cash CR production facility (when grant received)
DR dep expense CR acc dep (of net amount SO take Asset cost less grant / useful life)
Government loans - forgivable treatment
Same as above, provided recognition criteria is the same
Government loans - repayable with favorable interest rates
Benefit to entity of proceeds of loan less discounted value using effective interest method is recognized as grant.
How are non-monetary assets accounted for under IFRS?
either FV or nominal
What disclosures does IFRS require?
method of presentation
nature and extent of amounts recognized and benefits received
unfulfilled conditions and outstanding contingencies
ASPE differences?
non-monetary grants always recorded at FV
