ACCOUNTING FOR GOVERNMENT GRANTS AND DISCLOSURE OF GOVERNMENT ASSISTANCE (IAS 20)
Government grants or other types of government assistance are usually intended to encourage entities to embark on activities that they would not have otherwise undertaken. IAS 20 sets out the accounting treatment and disclosure of “government grants” and the disclosure requirements (only) of “government assistance.”
Government assistance, according to the Standard, is action by the government aimed at providing economic benefits to some constituency by subsidizing entities that will provide them with jobs, services, or goods that might not otherwise be either available or available at a desired cost. Depending on the nature of the assistance given and the associated conditions, government assistance can be of many types, including grants, forgivable loans, and indirect or nonmonetary forms of assistance, such as technical advice.
A government grant is government assistance that entails the transfer of resources in return for compliance, either past or future, with certain conditions relating to the entity’s operating activities, such as for remediating a polluted plant site.
IAS 20 deals with the accounting treatment and disclosure requirements of grants received by entities from government. It also mandates disclosure requirements of other forms of government assistance.
The Standard provides four exclusions:
1. Special problems arising in reflecting the effects ...