Chapter 8 - Government grants Flashcards
Government grants can be related to income or assets (primary condition is that the entity will purchase a NCA with it). With regards to revenue grants, this can only be recognised when?
When there is reasonable assurance that the entity will comply with the conditions of the grant, and that they will receive it. It should be recognised as income over the periods in which related costs are incurred.
We can Cr SPL (Income) or deducted from a related expense
Capital grants can be accounted for in two different ways. These are?
- Netting off method
Write off the grant against the cost of NCA, and depreciate using the lower cost - Deferred income method
Treat grant as deferred income and transfer a portion to SPL each year over the assets useful life
If conditions of grants are not met, they will need to be repaid. How do we account for this i both revenue and capital grants
Revenue - Reduce deferred income, if any. Recognise balance of repayment immediately in SPL
Capital
1. Netting off method
Increase CA by amount of repayment and recognise any cumulated dep that should have been recognised.
- Reduce deferred income by amount of repayment and recognise repayment as expense
Government assistance is not a grant. We dont recognise it because?
There is no practical way to value it
Under UK GAAP, grants are recognised by either?
Performance model or accruals model
What is the performance model?
Recognition depends on whether future performance related conditions apply.
If no conditions apply, we recognise when grant proceeds are received.
If conditions apply, we recognise when conditions are met.
What is the accruals model
Grants are related to revenue or assets.
For grants relating to revenue, grant income is related to periods in which future costs are incurred. If no future costs, recognise in period receivable
Asset grants, grant income recognised as income over the expected useful life of asset. Remainder should be deferred income.
