PAS 20: Government Grants and Assistance

PAS 20: Government Grants

• Objective: To provide guidance on accounting for government grants and disclosure of government assistance
• Scope:
  • Does not deal with special problems arising from changing prices or supplementary information
  • Excludes government assistance in the form of income tax-related benefits, government participation in ownership, and government grants related to biological assets

Recognition and Measurement

• Government grants are assistance provided by the government in the form of transfers of resources, subject to certain conditions
• Excludes government assistance that cannot be valued or transactions that cannot be distinguished from normal trading transactions
• Recognition:
  • Requires reasonable assurance that the entity will comply with grant conditions and receive the grant
  • Receipt of a grant does not provide conclusive evidence that conditions have been or will be fulfilled
• Government grants in the form of loans:
  • Forgivable loans are treated as government grants when there is reasonable assurance that the entity will meet the terms for forgiveness
  • Benefit of a government loan at a below-market rate of interest is treated as a government grant
• Measurement:
  • Benefit of a below-market rate of interest is measured as the difference between the initial carrying value of the loan and the proceeds received

Recognition in Profit or Loss

• Recognised in profit or loss on a systematic basis over the periods in which the entity recognises related costs
• Grants received as compensation for expenses or losses already incurred or for immediate financial support are recognised in profit or loss of the period in which they become receivable

Non-Monetary Grants

• Assets and related income or liability from non-monetary assets are measured at:
  • Fair value of the asset received
  • Nominal amount in some cases

Presentation

• Grants related to income:
  • Presented as part of profit or loss, either separately or under a general heading
  • Deducted in reporting the related expense
• Grants related to assets:
  • Presented in the statement of financial position either by:
    • Setting up the grant as deferred income
    • Deducting the grant in arriving at the carrying amount of the asset

Repayment of Government Grants

• A government grant that becomes repayable shall be accounted for as a change in accounting estimate
• For grants related to income, repayment is applied:
  • Initially against any unamortised deferred credit recognised in respect of the grant
  • Excess repayment is recognised immediately in profit or loss
• For grants related to assets, repayment is recognised by:
  • Increasing the carrying amount of the asset, with the cumulative additional depreciation recognised immediately in profit or loss
  • Reducing the deferred income balance by the amount repayable

Disclosures

• Required disclosures:
  • Accounting policy adopted for government grants, including methods of presentation
  • Nature and extent of government grants recognised in the financial statements
  • Unfulfilled conditions and other contingencies attaching to government assistance that has been recognised