IAS_20_Flashcards_Final

Question 1

What does IAS 20 cover?

Answer 1

Accounting for government grants and disclosure of government assistance.

Question 2

What is a government grant?

Answer 2

Assistance from government in the form of money or benefits for compliance with conditions.

Question 3

What is government assistance?

Answer 3

Help from government that may or may not involve a transfer of resources.

Question 4

When is a government grant recognised?

Answer 4

When there is reasonable assurance that the entity will meet the conditions and receive the grant.

Question 5

Should grants be recognised before conditions are met?

Answer 5

No, recognition happens only with reasonable assurance.

Question 6

How should grants related to income be presented?

Answer 6

As other income or deducted from related expenses.

Question 7

How should grants related to assets be presented?

Answer 7

As deferred income or deducted from the assets’ carrying amount.

Question 8

What does ‘deferred income’ mean in this context?

Answer 8

The grant is shown as a liability and recognised in profit over the asset’s life.

Question 9

How are grants recognised in profit or loss?

Answer 9

Over the periods in which the related costs are recognised.

Question 10

Can grants be recognised immediately?

Answer 10

Only if they relate to costs already incurred with no further obligations.

Question 11

What happens if a grant becomes repayable?

Answer 11

Reverse the income and adjust the asset or liability accordingly.

Question 12

How is repayment of a grant related to income treated?

Answer 12

As an expense in the period of repayment.

Question 13

How is repayment of a grant related to assets treated?

Answer 13

Increase the assets’ carrying amount or reduce deferred income.

Question 14

What kind of grants are excluded from IAS 20?

Answer 14

Grants that are in the scope of other standards like IAS 41 or IFRS 15.

Question 15

Are tax benefits considered government grants?

Answer 15

No, they are usually dealt with under IAS 12.

Question 16

What is an example of a grant related to income?

Answer 16

A wage subsidy or reimbursement of expenses.

Question 17

What is an example of a grant related to assets?

Answer 17

Money given to help buy a machine or building.

Question 18

Can a government loan be a grant?

Answer 18

Yes, if it has below-market interest and meets grant criteria.

Question 19

How is a below-market government loan treated?

Answer 19

The difference from market rate is treated as a grant.

Question 20

What discount rate is used to calculate the benefit of a low-interest loan?

Answer 20

The market rate of interest.

Question 21

How is the grant part of a low-interest loan recognised?

Answer 21

As income over the period the cost is incurred.

Question 22

Can non-monetary grants be received?

Answer 22

Yes, like free land or buildings.

Question 23

How are non-monetary grants measured?

Answer 23

At fair value or nominal amount.

Question 24

What must be disclosed about government grants?

Answer 24

Nature, conditions, impact on financials, and unfulfilled conditions.

Question 25

What must be disclosed about government assistance?

Answer 25

The type of assistance and how it affects financial statements.

Question 26

Is offsetting grants against assets allowed?

Answer 26

Yes, IAS 20 allows reducing the asset value or showing deferred income.

Question 27

How should grants be matched to expenses?

Answer 27

Over the same period as the expenses they are meant to support.

Question 28

Can grants for future costs be recognised now?

Answer 28

No, they are recognised when the cost is incurred.

Question 29

How should unused grant amounts be treated?

Answer 29

Carried as deferred income until matched with expenses.

Question 30

Should conditions of the grant be disclosed?

Answer 30

Yes, including any risk of non-compliance.

Question 31

What happens if conditions are broken?

Answer 31

The grant may become repayable and must be reversed.

Question 32

Should government grants be recognised in OCI?

Answer 32

No, they are recognised in profit or loss.

Question 33

What if the government gives a free asset?

Answer 33

Recognise the asset and the grant at fair value.

Question 34

What if the grant relates to multiple assets or expenses?

Answer 34

Allocate the grant fairly based on intended use.