International GAAP 2012: Generally Accepted Accounting Practice under International Financial Reporting Standards

Chapter 27

Government grants

1 Introduction

1.1 Government grants

2 Requirements of IAS 20

2.1 Nature of government grants and government assistance

2.1.1 Government assistance

2.1.2 Government grants

2.2 Scope

2.3 Recognition and initial measurement

2.3.1 Loans at less than market rates of interest

2.4 Matching grants against costs

2.4.1 Achieving the most appropriate matching

2.4.2 The period to be benefited by the grant

2.4.3 Separating grants into elements

2.5 Repayment of government grants

2.6 Government assistance

3 Presentation of Grants

3.1 Presentation of grants related to assets

3.1.1 Cash flows

3.2 Presentation of grants related to income

4 Disclosures

4.1 Government assistance

List of examples

Example 27.1: Government grant by way of forgivable loan

Example 27.2: Loan at less than market rates of interest

Example 27.3: Grant associated with investment property

1 Introduction

IAS 20 – Accounting for Government Grants and Disclosure of Government Assistance – applied for the first time more than twenty-five years ago. [IAS 20.41]. After such a period of time it is perhaps not surprising that the standard is showing its age. The standard, in fact, pre-dates the IASB’s Framework and the IASB itself notes that it is inconsistent with it,¹ resulting in the recognition in the balance sheet of deferred debits and credits that do not meet the Framework’s definitions of assets and liabilities and allowing a method of presentation that could result in an understatement of assets ...