Government Grant Flashcards
Which TWO of the following statements about IAS 20 Accounting for Government Grants and Disclosure of Government Assistance are true?
A government grant related to the purchase of an asset should be recognized in profit or loss over the life of the asset.
Free marketing advice provided by a government department is excluded from the definition of government grant.
On 1 January 20X1 Sty received $1m from the local government on the condition that they employ at least 100 staff each year for the next 4 years. Due to an economic downturn and reduced consumer demand on 1 January 20X2, Sty no longer needed to employ any more staff and the conditions of the grant required full repayment.
What should be recorded in the financial statements on 1 January 20X2?
A Reduce deferred income balance by $750,000
B Reduce deferred income by $750,000 and recognise a loss of $250,000
C Reduce deferred income by $1,000,000
D Reduce deferred income by $1,000,000 and recognise a gain of $250,000
