IFRS Essentials

IAS 20 GOVERNMENT GRANTS

1 INTRODUCTION AND SCOPE

IAS 20 deals primarily with government grants. The term government refers to state authorities and similar bodies whether local, national or international, irrespective of their legal form (IAS 20.3).

Government grants are assistance from the government in the form of transfers of resources to an entity in return for past or future compliance with certain conditions relating to operating activities of the entity (IAS 20.3). Government assistance also meets the definition of government grants if there are no conditions specifically relating to operating activities of the entity other than the requirement to operate in certain regions or industry sectors (SIC 10). Government grants exclude those forms of government assistance that cannot be measured reasonably (e.g. free technical advice), as well as transactions with the government that cannot be distinguished from the normal trading transactions of the entity (IAS 20.3 and 20.34–20.35). Government grants for biological assets measured at fair value less costs to sell1 are within the scope of IAS 41 and are therefore excluded from the scope of IAS 20 (IAS 20.2d, IAS 41.1c, and 41.34–41.38).

Grants related to assets are government grants whose primary condition is that the entity acquires or constructs long-term assets. Subsidiary conditions may also be attached (e.g. with regard to the type or location of the assets or the periods during which they are to be acquired or held). ...