IAS 20 – Accounting for Government Grants and Disclosure of Government Assistance

8 Repayment of government grants

8.1 Principle

A government grant that becomes repayable shall be accounted for as a change in accounting estimate according to IAS 8.

Usually grant becomes repayable if conditions of grant package are not fulfilled. For example, entity was required to continue the business operations for five years after the receipt of grant but it stopped its operations after two years.

8.2 Repayment of a grant related to income

Repayment of a grant related to income shall be applied in the following manner:

  • Firstly against any unamortised deferred credit recognised in respect of the grant; then
  • To the extent that the repayment exceeds any such deferred credit, or when no deferred credit exists, the repayment shall be recognised immediately in profit or loss.

8.3 Repayment of a grant related to an asset

Repayment of a grant related to an asset shall be recognised in the following manner:

  • Increase the carrying amount of the asset or reduce the deferred income balance by the amount repayable.
  • The cumulative additional depreciation that would have been recognised in profit or loss to date in the absence of the grant shall be recognised immediately in profit or loss.

Circumstances giving rise to repayment of a grant related to an asset may require consideration to be given to the possible impairment of the new carrying amount of the asset.

9 Government assistance

As stated earlier that government grant is a type of government assistance but the assistance of any the following nature is excluded from the definition of government grants:

  • government assistance which cannot be monetized e.g. provision of guarantees; and
  • transactions with government which cannot be distinguished from the normal trading transactions of the entity (e.g. selling goods to government)

However if benefit derived from such assistance is significant then the nature and extent should be disclosed

10 Disclosures

The following matters shall be disclosed:

  1. the accounting policy adopted for government grants, including the methods of presentation adopted in the financial statements;
  2. the nature and extent of government grants recognised in the financial statements
  3. unfulfilled conditions and other contingencies attaching to grants recognize