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PAS 20 Accounting for Government

Grants and Disclosure of Government
CONCEPTUAL FRAMEWORK Assistance
&
Learning Competencies
ACCOUNTING STANDARDS • Explain the recognition and measurement of
2020 Edition government grants.
• Explain the presentation of government grants in
Lecture Aid the financial statements.

By: Zeus Vernon B. Millan

Conceptual Framework & Acctg.

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Standards (by: Zeus Vernon B. Millan)

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Definition
Examples of Government Grants
• Government grants are assistance received from the
government in the form of transfers of resources in a. Receipt of cash, land, or other non-cash assets from the

exchange for compliance with certain conditions. government subject to compliance with certain conditions
b. Receipt of financial aid in case of loss from a calamity
• Government grants exclude government assistance
c. Forgiveness of an existing loan from the government
whose value cannot be reasonably measured or cannot
d. Benefit of a government loan with below-market rate of interest
be distinguished from the entity’s normal trading
transactions.

Conceptual Framework & Acctg. Conceptual Framework & Acctg.

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Recognition
• The following are not government grants:
a. Tax benefits, • Government grants are recognized if there is reasonable
b. Free technical or marketing advice, assurance that:
c. Provision of guarantees, a. the attached conditions will be complied with; and
d. Government procurement policy that is responsible for a b. the grants will be received
portion of the entity’s sales, and
e. Public improvements that benefit the entire community.

Conceptual Framework & Acctg. Conceptual Framework & Acctg.

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Standards (by: Zeus Vernon B. Millan) Standards (by: Zeus Vernon B. Millan)

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Classifications of government grants according Initial measurement

to attached condition • Monetary grants are measured at the
a. amount of cash received; or
a. Grants related to assets – grants whose primary b. the fair value of amount receivable; or
condition is that an entity qualifying for them should c. carrying amount of loan payable to government for which repayment is
forgiven; or
purchase, construct or otherwise acquire long-term
d. discount on loan payable to government at a below-market rate of interest.
assets.
b. Grants related to income – grants other than those • Non-monetary grants (e.g., land and other resources) are measured at the
a. fair value of non-monetary asset received.
related to assets.
b. alternatively, at nominal amount or zero, plus direct costs incurred in
preparing the asset for its intended use.

Conceptual Framework & Acctg. Conceptual Framework & Acctg.

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Standards (by: Zeus Vernon B. Millan) Standards (by: Zeus Vernon B. Millan)

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Accounting for Gov’t. Grants

• The main concept in accounting for gov’t. grants is the
MATCHING CONCEPT.
• This means that the gov’t. grant is recognized as income as the
entity recognizes as expense the related cost for which the grant is
intended to compensate.
Presentation of Government grants related to
assets
• Government grants related to assets are presented in the
statement of financial position either by:
a. Gross presentation –the grant is presented as deferred
income (liability); or
b. Net presentation – the grant is deducted when
computing for the carrying amount of the asset

Conceptual Framework & Acctg. Conceptual Framework & Acctg.

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Standards (by: Zeus Vernon B. Millan) Standards (by: Zeus Vernon B. Millan)

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Presentation of Government grants related to Repayment of Gov’t. Grants

income
• Grants related to income are sometimes presented in the • A government grant that becomes repayable is accounted for
income statement either by: as a change in accounting estimate that is treated
a. Gross presentation – the grant is presented separately prospectively under PAS 8.
or under a general heading such as “Other income”, or
b. Net presentation – the grant is deducted in reporting
the related expense

Conceptual Framework & Acctg. Conceptual Framework & Acctg.

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 QUESTIONS????

END
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Standards (by: Zeus Vernon B. Millan)

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