ACCOUNTING FOR

GOVERNMENT GRANTS IAS

20
NON CURRENT ASSETS

Tangible non
current assets

IAS 16 IAS 20 IAS 40

IAS 23
Property Plant Government Investment
Borrowing Costs
and Equipment Grants Properties
RECOGNITION OF GVNT GRANTS

Government grants are recognised when the:

 Entity will comply with the conditions attached to the grant
 Entity will actually receive the grant
• Grants should be recognised according to the deferred income approach, using a
systematic basis.(This spreads the income over the period in which the related expenditure
is recognised).
• If the grant is used to buy depreciable assets, the grant must be spread over the same life
and using the same method.
GRANT BECOMES REPAYABLE

• If a government grant becomes repayable, it is treated as a change in

accounting estimate.
• The payment is first shown against any remaining deferred income balance.
• Where the payment exceeds the deferred income balance then excess
payments is treated as an expense in profit or loss statement.
EXAMPLE 1 : GRANTS AND DEPRECIABLE
ASSETS

Blue Ltd bought an item of property, plant and equipment for $10million and
received a government grant of $2million. The PPE has a useful life of 10
years and has no residual value.
Required:
Explain how the purchase of the PPE and government grant would be
dealt with in the financial statements of Blue Ltd.