Government Grants (IAS 20)
The accounting for government grants and disclosure of government assistance under IAS 20, when to recognise a grant, the income versus capital presentation choices, and how to treat repayments. Written for finance teams applying the standard to real support schemes.
When a grant is recognised
Government grants are recognised only when there is reasonable assurance that the entity will comply with the conditions attached and that the grant will be received. Receipt of a grant is not, on its own, conclusive evidence that the conditions have been or will be met.
The income approach
IAS 20 requires grants to be recognised in profit or loss on a systematic basis over the periods in which the entity recognises the related costs the grant is intended to compensate, not on receipt. Grants related to income may be presented separately or netted against the related expense.
Grants related to assets
Grants relating to assets are presented either by setting up the grant as deferred income released over the asset’s life, or by deducting the grant in arriving at the asset’s carrying amount. The choice affects presentation, not the net result over time.
Repayment of grants
A grant that becomes repayable is accounted for as a change in accounting estimate. Repayment is applied first against any unamortised deferred credit, with any excess recognised immediately in profit or loss.
Written by the team at Finit Solutions, chartered accountants, Jersey.