a. Method 1 only c.

Neither method
b. Method 2 only d. Method 1 or Method 2
(ACCA)

1 In the case of grants related to an asset, which of these accounting treatments

(balance sheet presentation) is prescribed by PAS 20?
a. Record the grant at a nominal value in the first year and write it off in the
subsequent year.
b. Either set up the grant as deferred income or deduct it in arriving at the
carrying amount of the asset.
c. Record the grant at fair value in the first year and take it to income in the
subsequent year.
d. Take it to the income statement and disclose it as an extraordinary gain.
(Adapted)

2 In the case of grants related to income, which of these accounting treatments is

prescribed by PAS 20?
a. Credit the grant to “general reserve” under shareholders’ equity.
b. Present the grant in the income statement as “other income”’ or as a separate
line item, or deduct it from the related expense.
c. Credit the grant to “retained earnings” on the balance sheet.
d. Credit the grant to sales or other revenue from operations in the income
statement.
(Adapted)

Repayment of government grants

3 Which of the following statements are correct according to PAS20 Government
grants and government assistance?
I. Any adjustment needed when a government grant becomes repayable is
accounted for as a change in accounting estimate
II. In respect of loans from the government at an interest rate of 0%, an interest
charge should be made periodically in profit or loss
III. Where conditions apply to a government grant, it should only be recognized
when there is reasonable assurance that the conditions will be met
IV. A government grant should not be recognized until it is received in cash
a. I, III b. I, II, III c. I, III, IV d. I, II, III, IV
(ACCA)

4 Which of the following statements is true?

a. A donated machinery equipment for which the fair value has been determined
and for which installation costs were incurred should be measured at its
carrying amount on the books of the donee plus installation cost incurred.
b. Donations of property, plant and equipment received from shareholders should
be recorded at the fair value of the donated asset.
c. A donated fixed asset received as government grant and for which the fair value
 has been determined should be recorded as a debit to fixed asset and credit to
other income.
d. A government grant that becomes repayable is accounted for retrospectively.

Disclosure
5 Which of these disclosures is not required by PAS 20?