Summary: IAS 20

Government Assistance Government Grant

Actions by the Govt. to provide an economic
benefit specific to any entity
Does not include indirect actions affecting the
general trading conditions
Transfer of resources by Govt. to any entity
for compliance of any past or future
conditions relating to the operations of the
entity
Does not include trading/arrangements with
the Govt. in the normal course of business

Grants with the primary condition that the qualifying entity acquires long-term assets Grant Related to Assets

Can be
Types

Grants that are not related to asset Grant Related to Income

Cash Asset

Grant should not be recognized until there is reasonable assurance that:

Recognition Criteria
1) Entity will comply with the conditions of grant & 2) Grant will be received

Grant Related to Net Off Method Deferred Income Method

Assets Deduct the grant from the cost of the asset. Book the grant as deferred grant income
The net amount of the asset will be (DGI) – as liability - in BS and recognize it as
Grant Related to depreciated over the useful life of the asset income in P&L on a systematic basis over

Accounting Treatments
Income useful life of the asset
Repayment
Grant is taken to income over the Increase the CA of the asset with the amount Repayment
period matching the grant with the repayable. Additional depreciation that Reduce the balance of DGI by the amount
costs that it compensates would have been recognized if the grant was repayable. Additional repayment, if any,
not obtained, should be recognized shall be booked as an expense immediately
Repayment immediately as an expense
Depreciation on repayment can be calculated
Reduce the balance of DGI by the amount
as follows:
IAS 20 - Government Grants
Ahmed Raza Mir, FCA
Financial Accounting and Reporting I

repayable. Additional repayment, if any,

Years depreciated
shall be booked as an expense immediately Grant repaid x
Useful life of plant