Government refers to government, government agencies and similar bodies whether local, national or

international.
Government assistance is action by government designed to provide an economic benefit specific to
an entity or range of entities qualifying under certain criteria. Government assistance for the purpose
of this Standard does not include benefits provided only indirectly through action affecting general
trading conditions, such as the provision of infrastructure in development areas or the imposition of
trading constraints on competitors.
Government grants are assistance by government in the form of transfers of resources to an entity in
return for past or future compliance with certain conditions relating to the operating activities of the
entity. They exclude those forms of government assistance which cannot reasonably have a value
placed upon them and transactions with government which cannot be distinguished from the normal
trading transactions of the entity.
Grants related to assets are government grants whose primary condition is that an entity qualifying for
them should purchase, construct or otherwise acquire long-term assets. Subsidiary conditions may also
be attached restricting the type or location of the assets or the periods during which they are to be
acquired or held.
Grants related to income are government grants other than those related to assets.
Forgivable loans are loans which the lender undertakes to waive repayment of under certain prescribed
conditions.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.

These questions help you recognize your existing background Yes No

knowledge on the topic. Answer honestly.
Do the standard definitions given above match your personal
definitions for government grants?
Can you identify government grants from other types of assets?
Can you differentiate the different types of government grants?
Have you read the standard for measuring government grants?
Have you read the standard for presentation and disclosure of
government grants?
Total (Raw Score)

How to Account for Government Grants (IAS 20) by Silvia of CPDbox.

View at: https://www.youtube.com/watch?v=iEK8_5JPveU

IAS 20 — Accounting for Government Grants and Disclosure of Government Assistance

Scope
IAS 20 applies to all government grants and other forms of government assistance. [IAS 20.1] However, it
does not cover government assistance that is provided in the form of benefits in determining taxable income.
It does not cover government grants covered by IAS 41 Agriculture, either. [IAS 20.2] The benefit of a
government loan at a below-market rate of interest is treated as a government grant. [IAS 20.10A]
Accounting for grants
A government grant is recognised only when there is reasonable assurance that (a) the entity will comply with
any conditions attached to the grant and (b) the grant will be received. [IAS 20.7]
The grant is recognised as income over the period necessary to match them with the related costs, for which
they are intended to compensate, on a systematic basis. [IAS 20.12]
Non-monetary grants, such as land or other resources, are usually accounted for at fair value, although
recording both the asset and the grant at a nominal amount is also permitted. [IAS 20.23]
Even if there are no conditions attached to the assistance specifically relating to the operating activities of the
entity (other than the requirement to operate in certain regions or industry sectors), such grants should not be
credited to equity. [SIC-10]
A grant receivable as compensation for costs already incurred or for immediate financial support, with no
future related costs, should be recognised as income in the period in which it is receivable. [IAS 20.20]
A grant relating to assets may be presented in one of two ways: [IAS 20.24]
 as deferred income, or
 by deducting the grant from the asset's carrying amount.
A grant relating to income may be reported separately as 'other income' or deducted from the related expense.
[IAS 20.29]
If a grant becomes repayable, it should be treated as a change in estimate. Where the original grant related to
income, the repayment should be applied first against any related unamortised deferred credit, and any excess
should be dealt with as an expense. Where the original grant related to an asset, the repayment should be
treated as increasing the carrying amount of the asset or reducing the deferred income balance. The cumulative
depreciation which would have been charged had the grant not been received should be charged as an expense.
[IAS 20.32]
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
Government assistance
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)]

4.1
1. On January 1, 2018, Cof Corp. received a grant of P50,000 million from the government in order to
defray safety and environmental costs within the area where the enterprise is located. The safety and
environmental costs are expected to be incurred over four years, respectively, P4 million, P8 million,
P12 million, and P16 million. How much income from the government grant should be recognized in
the 2018?

2. On July 1, 2017, Far Corp. was granted a large tract of land in Region 10 by the government. The fair
value of the land is P10 million. Far Corp. was required by the grant construct a chemical research
facility and employ only personnel residing in the region. The estimated cost of the facility is P50
million with useful life of 20 years. The facility was completed early in 2018. Far Corp. should
recognize in 2018 an income from government grant at _______.

3. Pocket Co. was granted a parcel of land by a local government authority. The condition attached to
this grant was that Pocket Co. should clean up this land and lay roads by employing laborers from the
village where the land was located. The entire operation will take 3 years and is estimated to cost P100
million. P20 million will be spent of the first 2 years, then P60 million on the third year. The fair value
of the land is currently P20 million. How much should be recognized as income from government
grant at the end of the first year?
Determine whether these statements relate to you. Answer Yes No
honestly to check your progress.
I am able to define government grants and related terms.
I can identify government grants from other types of assets.
I can differentiate the different types of government grants.
I understand the measuring standard for government grants.
I can determine the presentation and disclosure requirements for
government grants.
Total (Raw Score)