IAS 20 Accounting for Government Grants and Disclosure of Government Assistance

• 20 December 2021
• by: metal@recycle
• in: Bookkeeping
• note: no comments

The presentation of government grants is dependent on whether it is a grant related to income or a grant related to assets. Whilst government grants are more common in the form of income, there is potential that entities could receive grants related to the purchase, acquisition or construction of assets. Contrast this with benefits that are directed to be used for lessees as a class, such as a lessor providing assistance, at its sole discretion, directly to lessees.

Accounting for Government Grants and Disclosure of Government Assistance (IAS

This government assistance is given only to entities or organization that are qualify for or meet certain criteria. Before going detail of the definition of government grants, let’s understand two common wordings that are relevant to the government grant. This way the amount received will not have any effect on Income Statement ledger account or Fixed Assets carrying amount. This means that such amounts cannot be distributed as a dividend to shareholders. The Interpretations Committee noted that the requirements in IFRS Standards provide an adequate basis to enable an entity to account for the cash received from the government.

• Depending on the terms of the specific grant there are different ways to account for what you have received.
• You can efile income tax return on your income from salary, house property, capital gains, business & profession and income from other sources.
• In the wake of the COVID-19 pandemic, the economy saw a greater reliance on government grants.
• IAS 20.39 outlines disclosure requirements related to government grants and other forms of government assistance.
• Any difference between cash proceeds and the liability’s fair value is recognised as a government grant (IAS 20.10A).
• If you would like to discuss any of the points raised, please speak to your usual Grant Thornton contact or your local member firm.

Methods of Accounting for Government Grants

Now more than ever the need for businesses, their auditors and any other accounting advisors to work closely together is essential. If you would like to discuss any of the points raised, please speak to your usual Grant Thornton contact or your local member firm. To address the challenges posed by climate-related risks, governments around the world are introducing various measures to help companies reduce carbon emissions. These measures include programmes financing the move to new, greener technologies.

Accounting for Government Grants With FRS 102 or IAS 20?

Non-monetary grants are recognised at fair value, although IAS 20.23 allows them to be recognised at a nominal amount, which might be materially different from the fair value, leading to criticisms of this alternative. Some of the content on this web page was provided by the government grant accounting Chartered Accountants’ Trust for Education and Research, a registered charity, which owns the library and operates it for ICAEW. The Corporate Reporting Faculty’s annual IFRS factsheets provide a more detailed discussion of recent IFRS amendments.

They exclude those forms of government assistance which cannot reasonably have a value placed upon them and transactions with government which cannot be distinguished from the normal trading transaction of the entity”. The accounting for government grants and any relevant disclosures of any government Partnership Accounting assistances are covered in IAS 20 – Accounting for Government Grants and Disclosure of Government Assistence. In 2022 FASB issued an Invitation to Comment, Accounting for Government Grants by Business Entities—Potential Incorporation of IAS 20, Accounting for Government Grants and Disclosure of Government Assistance, into GAAP.

• The reversal of a credit previously recognized as a reduction in the cost of an asset will increase the asset’s carrying amount.
• Surprisingly, IAS 12 also excludes investment tax credits (IAS 12.4), rendering them effectively not governed by IFRS.
• Capital grants are funds that are provided to assist in the acquisition, construction, renovation, repair of capital assets, or fixed assets.
• In most cases the periods over which an entity recognises the costs or expenses related to a government grant are readily ascertainable.
• A company should consider whether the change in circumstances that triggered the grant repayment may indicate that the asset, whose carrying amount has increased, is impaired.