IAS 20 -

GOVT GRANTS
 Recognition Criteria

① Co has Reasonable Assurance that it will fulfil conditions attached

.
in the grant
-

① That the will be Relieved

grant .

Types of Grant
① Grant related to Assets → To buy / construct an Asset .

① Grant related to Income → All grants other than grant related to asset are
grant related to Income .

Conditions .

a) Primary Conditions
To Buy / Construct an Asset .

Qualifying criteria (for eg .

# of Employees / Annual Profit etc)

b) Secondary Conditions
Minimum # of Yrs of stay / use .

Location

NOTE : Never Book Grant in EQUITY

{BANE au FF
"

xxx }X wrong
'
> Logic = Because Not Received from shareholder .

IAS Recommended Income

→ -
20
-
-
Approach .
Q Co bought Ma@n.e at Year O for $100,1
-

life 4-yearslmethodqth.ES
a .

Grant Reciered -
-
207-06't .

Required -
- FS Extract for Yr I ?

1£20 ooo , oo . . . . .
.
. . - - - - Joo -
- -
-
→ D9
"

naaao"÷T£M.
V
'
- -

D.9 500 D.g.Sooo a

:L:sooo
. .

⑤
Eagar
'

dials
-
Non -

cgq.it
against Matching principle
.

Bank 2900 X
:
.
.

Incomezqogg → Amortization
we
Deff 29¥ 504am
,

= .

←
This grant will be
Amortized over the life of Asset ( Matching )

D¥¥p
}
machine
,za%9oo%o
-

Bank 20,00 .
,
ooo

sepngyparte.ca Amor't of stood

20,7Pa Machine
.

grant
#
#

Net 20 ooo Expense

V
def -8-7 29001mm ,

second Approach
This amortization of grant is a income.
.

-
i
Amortization of assets is an expense.
Amortization of liability is an income.
 Co -

bought an Asset outfoot Xs for $810

life toys ( method stzti.me) Scrap Value =
$120
=
Grant Reciered -
- 301 of the cost
.
.

Depreciation Policy Monthly Basis DB .

Required YIE 31 "lh ?

2280
: FS Extract for the =

D.gs 204
i in air
.

*
- -
- -
-
.

6M
y 1st 31 Marmo
08 31 Marx9
'

1 Apr og Oct .

Bank 2410 DI 12 D.924

Deff Inc 240 PEL 24
'

peryrdep K¥1

2,446--244×1,2=12--800--120
=

Amortdggrant
.

life
.
-
.

toys
=68/amX§=34/
PGL HE 31 Mar og
.

SOFP Asat 31 marog

Dep Exp 34 Machine

-

cost 800-34
. = 76.6
Amor't of
grant Noncurrent liab
22
=
Deff Income = 204
Current liab

Deff Income =
24
 Co -

bought an Asset on "July

I 09 for $1200
life 20
years ( method straight line) Scrap Value -
- $200
Grant Reciered -
- 401 of the cost
.
.

Depreciation Policy Yearly Basis

St
?
1µg
March 010
Required : FS Extract for the YIE 31 =

DB 432
DI -48? -456
.

-24
'
-

$-1
- -

- -

.
.

I to
1 Apr 09 I July 09
=
31 Mar 010
④ 39mg,
Bank 480 Deff Inc 24 Amort
480
y P9L2
Deff Inc -

dep = 12N - 200

=

50¥
.my
Amort of
grant =
4.80 =
241annum
201ps 20yd .

PGL YIE 31 Marmo

/ SOFP

Machine
As AT

(1200-50)
31 March 010

← 1150
Dep Exp 50 /
.

Non current trials

-

Amort of 124$ Deff income .

- - -
-

432
current liab
grant -

Deff Income

#
26 - -
24
 Repayment of Grant
DI #000
you
DIED
'

.DH
⑧ arm M Ma
-

)
l Jan 08 Gm 31 DecX9
o
I
July 08 31 Dec 08

I'off Deff Inc 2000

machine cost # oyo.co
pg , zoo .

( life 2¥
-
-

.
-
-

I /
''

:t7÷
am
.

Amortization of Grant tooo

Defftncone too .

Bank 4000 -

BOO
2ooofannin.xqz.LY ; PEL
Deff Inc 4000 . t .-
-

⇐
-

✓ Cash . .
4000
Condition -

↳ If sold within 2
years of Purchase their Full Repayment

Esau::*
qndred.tk#
→ a .

-
↳
wsifmed.iq#tuITon:ditions : DDI faff - r

¥ If sold within first year of Purchase their

-
full Repayment .

After that a fixed

PEL JOT
Repayment of $500 is needed -

✓
e

Cash -5500
= .
.

-
 ↳ Cod Assets on 31 Deca

--#
Grant Related to Income
D.I -
- 400,00 DI -31900.0
-
.
'

DI -
-
150,000 .

l l I

/
,

0 I 2
,

13954140900400 off ,
*
wages 300 .
o
/ Wages 400,000
'- U - i

cash 300,000 Cash 400,000

relieved
grant c

at Yro
DB . -

90,00 I
DJ 160,00 .

250,000
. .
= ~

This grant is for future labour

✓
-
pal 99dB .
-
.

pal iboihh .

cost It is 30% labour cost

. .

Unconditional Grant

↳ govt has given grant because of Past Act

↳ Just immediately Book the grant in Pgl

Bank "

put xxx

Grant in the form of Asset

↳ If govt has directly given us Asset then Record that Asset and
, Deffer ed Income on the
Fair Value of that Asset Received -
 Fairvaher depreciated

m
depreciate >
'

¥7
an
.ae .

Deff.tn#oooosAmortige
.
Eg .

Govt Assistance Govt Grant

Economic Benefit Provided Govt
By ,
Economic Benefit Provided by Govt in Form
of
not in the Economic Resources Resources
form of Economic

↳ Recognized
eg Competitor Ban
by Govt must be
-

↳ Treatment Disclosures
only
- '

Bank
.

xxx

Govt Grants .Deff.Inwnexg

Bank
Liability
N'×

✓ Income →
Deff *×

①
↳ This deferred
income
is

' '
FRAMEWORK
Does not meet the
official definition of Liability According to .

future
As there is no
Obligation to
Transfer Economic Resources in .

'

of Matching Principle
'

Then Book Book this

why we this
liability ,
we
liability ,
because

Because if
' '
we dont book this liability then the other
option we have is PG L which is
,

against matching principle to Book all Income in one

go
.
 -# ,
-

-
-
Bank 8

- = - r -
77777.0
- -
-
4mi
Deff
-

Income 8

-dy⇐
- " '

↳ This grant should Amged be the

life of Asset ,
over
.

Because the
objective of Amortization is Matching Expenses
Income
and .

So as we have depreciated Machine over

10
yrs
. So we need to
Amortize grant over 10
years
also .

Amor't =
8- -

10 D8 0.8
yrs .
.

0.81 annum
✓
-
PGL . -
0.8