Government assistance ASPE 3800 IAS 20 SIC 10

Question 1

How is government assistance toward current
expenses accounted for?

Answer 1

ASPE 3800 and IAS 20

• Included in income for period – can be shown
  as revenue or netted against the related
  expense

Question 2

How is government
assistance toward future
expenses accounted for?

Answer 2

ASPE 3800 and IAS 20

• Defer and amortize into income as related expenses occur
  ‒ can either be shown as revenue or netted against
  related expense

Question 3

What are the two alternatives for accounting for government assistance towards the purchase of fixed assets?

Answer 3

ASPE 3800 and IAS 20

• Choice to either:

‒Deduct from related fixed asset and calculate
amortization on the net amount

‒Defer and amortize into income on same basis
that the capital asset is depreciated

Question 4

What condition must be met in order to accrue a grant receivable (amounts promised but not yet received) at year-end?

Answer 4

ASPE 3800 and IAS 20

• Reasonable assurance that the entity has complied
  and will continue to comply with all the conditions of
  the grant

Question 5

When should a forgivable loan be recognized into
income?

Answer 5

ASPE 3800
* Treated same a grant with conditions attached i.e.
recognized in period entity becomes entitled to receive it

• If circumstances indicate that repayment will be
  required i.e. that the conditions for forgiveness
  will not be met, a liability would be recorded (same as a grant with conditions attached)

IAS 20
* Treated as a grant as long as there is reasonable assurance that the entity will meet the terms of forgiveness

Question 6

How should the requirement to repay government assistance (including forgivable loans) be accounted for?

Answer 6

ASPE 3800
* Accounted for prospectively when circumstances arise that indicate repayment will be required e.g.

‒ If it was originally recorded in income or netted against expenses - credit liability and debit expense in the period when circumstances indicate
repayment will be required

‒ If it was originally netted against the cost of a capital asset - increase the cost of the asset by the amount of assistance that is repayable and amortize revised cost over remaining life

IAS 20
* If it was originally recorded in income or netted against expenses - credit a liability and debit an
expense in the period when circumstances indicate repayment will be required

• If it was originally netted against the cost of a capital asset - the cost of the asset is increased and
  the cumulative additional depreciation that would have been recognized in the absence of the
  grant is recognized in the current period (the net book value of the asset would be as if the grant had
  never been received)