PAS_20

• Government grants


  Assistance received from the government in the form of transfers of resources in exchange for compliance with certain conditions
• Government grants exclude government assistance whose value cannot be reasonably measured or cannot be distinguished from the entity's normal trading transactions
• Examples of Government Grants


  • Receipt of cash, land, or other non-cash assets from the government subject to compliance with certain conditions
  • Receipt of financial aid in case of loss from a calamity
  • Forgiveness of an existing loan from the government
  • Benefit of a government loan with below-market rate of interest
• The following are not government grants: Tax benefits, Free technical or marketing advice, Provision of guarantees, Government procurement policy that is responsible for a portion of the entity's sales, and Public improvements that benefit the entire community
• Recognition of Government Grants

  Government grants are recognized if there is reasonable assurance that: the attached conditions will be complied with; and the grants will be received
• Classifications of government grants according to attached condition

  • Grants related to assets – grants whose primary condition is that an entity qualifying for them should purchase, construct or otherwise acquire long-term assets
  • Grants related to income – grants other than those related to assets
• Initial measurement of Monetary grants

  Measured at the amount of cash received; or the fair value of amount receivable; or carrying amount of loan payable to government for which repayment is forgiven; or discount on loan payable to government at a below-market rate of interest
• Initial measurement of Non-monetary grants

  Measured at the fair value of non-monetary asset received, alternatively, at nominal amount or zero, plus direct costs incurred in preparing the asset for its intended use
• Accounting for Government Grants

  The main concept is the MATCHING CONCEPT. This means that the government grant is recognized as income as the entity recognizes as expense the related cost for which the grant is intended to compensate
• Presentation of Government grants related to assets

  • Gross presentation – the grant is presented as deferred income (liability)
  • Net presentation – the grant is deducted when computing for the carrying amount of the asset
• Presentation of Government grants related to income

  • Gross presentation – the grant is presented separately or under a general heading such as "Other income"
  • Net presentation – the grant is deducted in reporting the related expense
• Repayment of Government Grants


  A government grant that becomes repayable is accounted for as a change in accounting estimate that is treated prospectively under PAS 8