Overview of IAS 20
Government grants are recognised when there is reasonable assurance that the entity will comply with the conditions related to them and that the grants will be received.
Grants related to income are recognised in profit or loss on a systematic basis over the periods necessary to match them with the related costs that they are intended to compensate. They are offset against the related expense or presented as income, either separately or under a general heading such as ‘other income’. The timing of such recognition in profit or loss will also depend on the fulfilment of any conditions or obligations attaching to the grant.
Grants related to assets are either offset against the carrying amount of the relevant asset or presented as deferred income in the balance sheet. Profit or loss will be affected, either by a reduced depreciation charge or by deferred income being recognised as income systematically over the useful life of the related asset.
Government grants do not include government assistance whose value cannot be reasonably measured, such as technical or marketing advice. [IAS 20.34] Disclosure of the benefits is required. [IAS 20.39(b)]
Disclosure of government grants
The following must be disclosed: [IAS 20.39]
- accounting policy adopted for grants, including method of balance sheet presentation
- nature and extent of grants recognised in the financial statements
- unfulfilled conditions and contingencies attaching to recognised grants