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Section 6300: Government Grants and Assistance

International Accounting Standard 20
Accounting for Government Grants and Disclosure of Government Assistance

1. First version of IAS 20
"Accounting for Government Grants and Disclosure of Government Assistance"
issued in April 1983

2. Revisions
Reformatted in 1994
Amended by IAS 10 in May 1999
Amended by IAS 41 in January 2001

3. Government assistance
--> government provides economic benefits
if an entity qualifies certain criteria

4. Government grants
--> government transfers resources
if an entity satisfies certain conditions about operating activities

5. Grants related to assets
--> primary condition of these grants is to acquire long-term assets

6. Grants related to income
--> government grants not classified as grants related to assets

7. Forgivable loans
--> repayment is waived if certain conditions are met

8. Government grants are recognised, IAS 20.7
only if (1) and (2) are reasonably assured
(1) grants will be received
(2) conditions of grants will be satisfied

9. Income approach is used, IAS 20.12
Government grants are recognised as income to match with related costs.
Capital approach is not permitted
Government grants are not credited directly to equity.

10. Grants Related to Assets, IAS 20.24
Two methods are allowed to present grants related to assets
in the statement of financial position
Method 1: grants are reported as deferred income
Method 2: grants are deducted from carrying amount of asset

11. Grants Related to Income, IAS 20.29
Two methods are allowed to present grants related to income
in the statement of comprehensive income
Method 1: grants are reported as other income
Method 2: grants are deducted from related expense

12. Repayment of Government Grants
If a government grant becomes repayable,
--> it is a revision to an accounting estimate.

13. Repayment of grant related to income, IAS 20.32
(1) first applied to unamortized deferred credit
(2) the remainder is recognised as an expense

14. Repayment of Government Grants, IAS 20.32
Repayment of grant related to asset
(1) decrease in deferred income or
(2) increase in carrying amount

If carrying amount of an asset increases,
--> cumulative additional depreciation, due to the increase in carrying amount,
--> is recognised as an expense, immediately