ACCA FR Syllabus B. Accounting For Transactions In Financial Statements - Government grants Part 2 - Notes ^{2 / 2}

Conditions

These may help the company decide the periods over which the grant will be earned. 

It may be that the grant needs to be split up and taken to the income statement on different bases.

Compensation

The grant may be for compensation on expenses already spent. 

Or it might be just for financial support with no actual related future costs.

Whatever the situation, the grant should be recognised in profit or loss when it becomes receivable.

NB
If a condition might not be met then a contingent liability should be disclosed in the notes. Similarly if it has already not been met then a provision is required.

Non-monetary government grants

Think here, for example, of the government giving you some land (ie not cash). 

To put a value on it - we use the Fair Value.  Alternatively, both may be valued at a nominal amount.

Repayment of government grants

This means when we are not allowed the grant anymore and so have to repay it back. 

This would be a change in accounting estimate (IAS 8) and so you do not change past periods just the current one.

• Accounting treatment (capital grant repayment):

  • Dr Any deferred Income Balance or Dr Cost of asset
  • Dr Income statement with any balance

  and CR cash with the amount repaid

  The extra depreciation to date that would have been recognised had the grant not been netted off against cost should be recognised immediately as an expense.

• Accounting treatment - Income Grant Repayment

  Dr Income statement
  Cr Cash