GOVERNMENT GRANTS - PAS 20

- the government granted some form of assistance to purchase or build PPE items

- assistance by the government in the form transfers of resources to the entity in return
for past or future compliance with certain conditions relating to the operating activities of
the entity.

- government grants, including non-monetary grants at fair value, shall not be

recognized until there is reasonable assurance that:
 The entity will comply with the conditions attaching to them
 The grants will be received (receivable)
Grants related to Grants Related to
Assets Income
CLASSIFICATION - grants whose primary Residual definition
condition is that an entity
qualifying for the should
purchase, construct or
otherwise acquire long
term assets
ACCOUNTING - recognize as income - should be deferred and
over the periods and in recognized as income in
the proportions in which the same period as the
depreciation on those relevant expense
assets is changed or over
the periods which bear
the cost of meeting
obligations
PRESENTATION - either by setting up the Either separate income or
grant as deferred income under a general heading
or by deducting the grant such as “other income” or
in arriving at the carrying deducted in reporting the
amount of the asset related expense
Repayment (Change in Increase in the carrying Apply first against any
Accounting Estimate) amount of the asset or amortized deferred
reduced the deferred income, or where no
income balance deferred income exists,
recognize immediately as
The cumulative additional expense
depreciation that would
have been recognized to
date as an expense in the
absence of the grant
should be recognized
immediately as an
expense
BORROWING COST - PAS 23
- part of initial cost of PPE

- borrowing cost that are directly attributable to the acquisition, construction or

production of a qualifying asset form part of the cost of that asset. Other borrowing
cost are recognized as an expense.

- qualifying asset - an asset that takes substantial period of time to get ready for its
intended use
- borrowing cost - interest and other cost incurred by an enterprise in connection with
the borrowing of funds
 Interest Expanse - calculated using the effective interest method
 Finace Charges - in respect of finance leases
 Exchange Differences - arising from foreign currency borrowings to the extent
that they are regarded as an adjustment to interest cost

General Rule:
An entity shall capitalize borrowing costs that are directly attributable to the acquisition,
construction or production of a qualifying asset as part of the cost of an asset

An enity shall recognize other borrowing costs as an expense in the period in which it
incur them

The amount of borrowing cost that an entity capitalizes during the period shall t exceed
the amount of borrowing costs it incurred that period

Commencement of Capitalization:
The capitalization of the borrowing costs, as part of the cost of a qualifying asset shall
commence when:
 Ezpenditures for the asset are being incurred
 Borrowing costs are being incurred
 Activities that are necessary to prepare the asset for its intended use or sale are
in progress

Suspension of Capitalization:
- Capitalization of borrowing costs shall be suspended during extended periods of
suspension of active development of a qualifying asset

- An entity also does not suspend capitalizing borrowing costs when a temporary delay is
a necessary part of the process of getting an asset ready for its intended use

- an entity does not normally suspend capitalizing borrowing costs during the period
when it carries out substantial technical and admin work

Cessation of capitalization:
An entity shall cease capitalizing borrowing costs when substantially all the activities
necessary to prepare the qualifying asset for its intended use or sale are complete

When an entity completes the construction of a qualifying asset in parts and each part is
capable of being used while construction continues on other parts, the entity shall cease
capitalizing borrowing costs when it completes substantially all the activities necessary to
prepare that part for its intended use or sale.