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7/27/2019 IAS 20 Government Grants
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Government Grants are:
• Assistance by government.• In the form of transfers of resources to an entity.• In return for past or future compliance with certain
conditions relating to the operating activities of theentity.
• They exclude those forms of government assistance
which cannot reasonably have a value placed on themand which cannot be distinguished from the normaltrading transactions of the entity.
Exclusions:• Government assistance that is provided for an entity in
the form of benefits that are available in determiningtaxable income or are determined or limited to the basisof income tax liability.
• Government participation in the ownership of an entity.• Government grants covered by IAS 41 – Agriculture.
Types of Grants:1. Grants related to income2.Grants related to assets
Grants related to income A grant receivable as compensation for costs:
• Already incurred; or• For immediate financial support, with no future related
costs.Should be recognized as income in the period in which it isreceivable.
A grant relating to income may be presented in one of two ways:• Separately as ‘other income’; or
• Deducted from the related expense.
Grants related to assets
A grant relating to assets may be presented in one of two ways:
• As deferred income (and released to profit or loss whenrelated expenditure impacts profit or loss); or
• By deducting the grant from the asset’s carrying amount.
Non-cash grantsGovernment assistance received which is not cash should
be recognized at the fair value of the benefit received.
RecognitionGrants are recognized when there is reasonable assurancethat:
• The entity will comply with the conditions attached tothe grant; and• The grant will be received.
The grant is recognized as income over the periodnecessary to match it with the related costs, for which it isintended to compensate on a systematic basis and shouldNOT be credited directly to equity.
If a grant becomes repayable, it should be treated as therevision of an accounting estimate.
Disclosures
• Accounting policy adopted for grants, including methodof presentation in the Statement of Financial Position.
• Nature and extent of grants recognized in the financialstatements.
• Unfulfilled conditions and contingencies attaching torecognized grants.
• Any government assistance whose value cannot bemeasured reliably (such as technical or marketingadvice)
• Additional disclosure is required for profit-orientedentities.
IAS 20 - Government Grants
C o p y r i g h t 2 0 1 2 E r u d i t e A p e . c o m - A l l r i g h t s r e s e r v e d - E & O E 0 6 - 1 2
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